FarmPolicy

October 13, 2019

Sen. Thune: Commerce Subcommittee on West Coast Port Disruptions

A news release from Sen. John Thune (R., S.D.) indicated today that, “[Sen. Thune], chairman of the Senate Committee on Commerce, Science, and Transportation, today at a hearing before the Commerce Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security highlighted the frustrations and challenges South Dakota agriculture producers, businesses, and shippers are facing due to the self-imposed worker slowdowns at various West Coast ports. Thune highlighted two South Dakota stories and called for all sides to come together to find a resolution in the port dispute that has been going on for roughly nine months.

“‘We greatly appreciate Senator Thune highlighting these critical issues before the Commerce Committee,’ said Jodie Anderson, Executive Director of the South Dakota Cattlemen’s Association. ‘The port strike limits the ability of ranchers throughout South Dakota to move fresh meat to Asian markets. This means lost revenue, unnecessary port charges, and severe consequences for our customer relationships. We thank Senator Thune for his call for greater urgency and intensity in ending these delays.’

Port inefficiencies impacting South Dakotans:

“‘I’ve talked with and Tyson’s [Fresh Meats] in my state in South Dakota and they have shared with me that we’ve got beef and pork sitting in freezers near the ports instead of heading to Asian markets, while we’ve got large container ships sitting off the coast waiting to export our nation’s premium products. That affects jobs. Tyson’s employs 41,000 people and the USDA estimates there a million jobs associated with agricultural exports in this country and so it has a profound impact on the economy, not just on the West Coast but all across the country. Workers in South Dakota and other places are reliant upon…a reliable supply chain.

“‘Outdoor Gear Inc., a family-owned business in South Dakota, they are a wholesaler, and it receives 95 percent of its inventory from West Coast ports and has been forced to miss deadlines, pay late-delivery penalties, and pass up important sales opportunities, including in December, which of course is the holiday peak season.’

Need for resolution:

“‘This is an issue that just really needs our focus. It’s a huge drain on the economy and I just urge all sides to come to a resolution in this dispute, and find a solution as soon as possible. We just can’t afford to drag this on and have our economy pay this kind of price. If we can get this behind us we can start focusing our energy and creativity on a lot of the other long-term infrastructure challenges that desperately need our attention as well.'”

Highlights: ERS 2015 Farm Sector Income Forecast

On Tuesday, USDA’s Economic Research Service (ERS) released its 2015 Farm Sector Income Forecast, which stated that, “Net farm income is forecast to be $73.6 billion in 2015, down nearly 32 percent from 2014’s forecast of $108 billion. The 2015 forecast would be the lowest since 2009.”

ERS pointed out that, “The annual value of U.S. crop production is expected to decline in 2015 from 2013’s record high value, reflecting net inventory loss and the third straight year of declining cash receipts for crops. The largest forecast decline is for corn receipts, which have fallen 38 percent since 2012.”

With respect to livestock, the update explained that, “The value of U.S. livestock production is forecast to decline in 2015, as a sharp drop in receipts more than offsets a positive value of inventory change. Cattle/calf receipts are expected to grow significantly while hog and milk receipts decline. Prices are expected to increase for cattle and calves and drop for hogs and milk. Beef production and beef/veal exports are expected to decline while pork production and exports are expected to increase. Milk production and marketings are expected to increase in 2015 while milk exports are expected to decline.”

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ERS also stated that, “The projected $2.5-billion increase in 2015 production expenses extends the upward movement in expenses that has occurred over the past 6 years. However, the increase in 2015 is expected to be the smallest since expenses declined in 2009.”

More specifically on production costs, the update indicated that, “Demand for feed should be up. The number of cattle on feed is projected to be slightly higher in 2015 and cattle are being fed to heavier weights because of lower feed prices. Hog and broiler production are both expected to be up more than 4 percent during 2015.

“Since cattle purchases comprise 75 percent of livestock and poultry purchases, they are still being driven by sustained high prices for feeder steers. The price for Oklahoma City feeder steers is forecast to rise 16.5 percent in 2015, due primarily to the tight inventory of cattle. High retail prices for beef, strong export markets, and lower feed costs continue to support demand for feeder cattle.

“The three major crop-related expenses—seeds, fertilizer, and pesticides—are forecast to decrease a combined $0.5 billion (0.8 percent) in 2015 due to small increases in seed and pesticide purchases and a decrease in fertilizer purchases.”

In addition, “Fuel and oil expenses are forecast to decrease by 26.7 percent in 2015. Corresponding to the drop in oil prices, the Department of Energy projects a 34-percent drop in the price of diesel in 2015.”

On the issue of government payments, ERS stated in part that, “The initiation of new programs under the Agricultural Act of 2014—such as the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs—is expected to lead to a 15-percent increase in government payments in 2015 (see table on government payments). Payments under these new programs are projected to exceed recent payments under some repealed programs such as the Direct and Countercyclical program and the Average Crop Revenue Election program.

“Upland cotton is the only formerly covered commodity that will not qualify in either PLC or ARC. The Cotton Transition Assistance Program was designed to issue payments in 2014 and 2015 only. Those payments should decline sharply in 2015 as they are limited to upland cotton farmers in counties not yet covered by the new Stacked Income Protection (STAX) program.

“The Milk Income Loss Contract ended in 2014 and is replaced by the Dairy Margin Protection and Dairy Product Donation programs. However, no payments are expected under these programs in 2015, as prices remain high enough not to trigger payments.”

In a more specific update on Assets, Debt, and Wealth, ERS stated that, “Historically, farmland values have driven changes in the total value of farm sector assets, due to the large proportion—82.6 percent in 2013—of the sector’s assets held in real estate. Accordingly, the projected moderation in farm sector asset growth in 2015 is primarily driven by a 0.8-percent decline in the value of farm real estate. Farmland values have increased rapidly in recent years, as high crop prices and low interest rates led to strong demand. With receding crop prices and higher expected borrowing costs, farmland value growth is forecast to moderate in 2014 before declining in 2015. The projected decline in farm real estate asset value also reflects a projected drop in the amount of land in farms, continuing a gradual, historical decline.”

And with respect to Farm Business Income, ERS indicated that, “The forecast average net cash farm income (NCFI) of $79,200 for all farm businesses in 2015, a decline of 22.7 percent from 2014 (see table), is in line with the sectorwide forecast decline for NCFI, which represents the amount of cash available to service debt, pay family living expenses, and make investments. It is not a comprehensive measure of profitability, however, since it does not account for changes in inventory, accounts payable, accounts receivable, and depreciation.”

Keith Good

NCIS- Ag Groups Ready to Work Together to Defend Crop Insurance

Categories: Farm Bill

Ag Groups Ready to Work Together to Defend Crop Insurance

NATIONAL CROP INSURANCE SERVICES (NCIS)

FOR IMMEDIATE RELEASE February 10, 2015

(BONITA SPRINGS, FLA.) – Representatives of various agricultural groups in Washington, D.C. voiced support for crop insurance during the annual meeting of the American Association of Crop Insurers and the National Crop Insurance Services. The session was designed to give crop insurers perspective not only from Capitol Hill, but also from farmers across the country.

We want crop insurance for all commodities in all states. It’s very clear every commodity wants to have crop insurance,” said American Farm Bureau Federation’s Mary Kay Thatcher.

Our farming members are by and large very happy with the crop insurance options in front of them,” added Bev Paul of the American Soybean Association.

The message was consistent with a letter that more than 30 groups sent to Congressional committees last week expressing disappointment in the president’s budget proposal that undermined crop insurance. The groups encouraged Congressional leaders to look elsewhere when they prepare their own budget plans. In the letter, they explained “budget levels currently in place for crop insurance ensure the affordability and availability of risk protection, while maintaining the viability of private-sector delivery.”

Indeed, these three tenets of affordability, availability, and viability were mentioned as the key to keeping the crop insurance system working effectively and efficiently. Another takeaway from panelists was the importance of sticking together and building alliances to make sure crop insurers can continue to offer a variety of options to farmers.

Our focus in the years to come will be defending what we have,” said Robbie Minnich of the National Cotton Council of America.

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Policy Issues; Ag Economy; Trade; Regulations; and, Biofuels- Tuesday

Policy Issues

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “A statement by U.S. Agriculture Secretary Tom Vilsack last week that crop insurance companies are making a 14% to 15% return on investment raised eyebrows here [Bonita Springs, Fla.] at a crop insurance industry meeting.

Brandon Willis, the administrator of the Risk Management Agency, sought to clarify the secretary’s comments when speaking to industry leaders this past weekend. Willis acknowledged more recent years had been rockier for the industry than the industry’s historical performance.”

Mr. Hagstrom indicated that, “Vilsack did an interview with the website Politico last week on the one-year anniversary of the farm bill that also delved into crop insurance cuts. Vilsack said, ‘One of those reforms would be to take a look at what the average rate of return is on crop insurance. Today it’s roughly 14%-15% on average of return on investment.’

“‘The reality is that this entity and this operation could be quite effective at a 12% return on investment, and I think most taxpayers would be happy if their portfolio was growing by 12%,’ he said. ‘So I think first and foremost it’s a question of what’s a reasonable rate of return in a government-sponsored and government-supported program.’”

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