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Policy; Ag Economy; Trade; and, Biofuels – Wednesday

Policy Issues

Jerry Hagstrom reported yesterday at National Journal Online that, “When Agriculture Secretary Tom Vilsack testifies before the House Agriculture Committee Wednesday, he is likely to get some tough questions about the Obama administration’s views on food stamps and crop insurance–and the country will get a sense of just how difficult it will be for Congress to cut anything out of Agriculture Department programs.

“Congressional Republican leaders, including House Agriculture Committee Chairman Michael Conaway of Texas, have expressed enthusiasm for reining in the deficit through reconciliation, a budget tool that would require each authorizing committee to trim the programs under its jurisdiction, probably on a percentage basis.

But the Republican congressional focus is on cutting food stamps while the administration has proposed cutting crop insurance. Last week at the first of two crop insurance industry conferences here [Bonita Springs, Fla.], Mary Kay Thatcher of the American Farm Bureau Federation tied the two together, telling the Crop Insurance and Reinsurance Bureau meeting that proposals to cut food stamps put a ‘bull’s eye’ on crop insurance. Liberals will argue that if Congress is going to reduce the deficit by taking food away from children it should also cut farm subsidies, Thatcher said.”

Mr. Hagstrom indicated that, “Food stamps—formally the Supplemental Nutrition Assistance Program, or SNAP—is the biggest Agriculture Department program, and cutting it would seem easy in a Republican-led Congress. But the liberal-leaning Center for Budget and Policy Priorities noted in a report this week that food stamp participation rates and spending have declined since the expiration of Recovery Act provisions that allowed more people to get higher benefits, and participation also has gone down as the economy improves. The administration and congressional Democrats would oppose any efforts to make eligibility more difficult or reduce benefit levels, and so might some Republicans as the presidential election year approaches.

“The situation with crop insurance is the opposite. While the aggies in Congress defend crop insurance, the Obama administration has long held the view that the program, which pays for about 62 percent of the cost of farmers’ premiums and pays crop insurance companies to manage the program, is subsidized more than necessary, especially for big farmers. The cost of the program is about $9 billion per year, although federal budget officers have projected that the cost will go down if crop prices stay low and crops have a lower insurable value.”

The National Journal article stated that, “The most important defender of food stamps and crop insurance may be Senate Agriculture Committee ranking member Debbie Stabenow, a Democrat from Michigan, who told National Journal that she will oppose any cuts to the farm bill in budget reconciliation.

“Stabenow’s position is important because she is a member of the Senate Budget Committee, which will determine the terms for reconciliation.”

Yesterday’s update added that, “‘My message is we already did our part’ in the 2014 farm bill, said Stabenow, adding that ‘we are the only committee that voluntarily cut spending $23 billion and cut more than 100 programs.’

“‘Universally people do not want to reopen the farm bill, any part of it,’ Stabenow said. If Congress wants to do reconciliation, she added, ‘they can do it for everybody else.’”

An update yesterday from National Crop Insurance Services indicated that, “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.”

Meanwhile, a news release yesterday from the Food Research and Action Center (FRAC) stated that, “School breakfast continues to make significant gains in communities across the U.S., according to two new analyses by [FRAC] released today, which look at school breakfast participation at the district, state, and national level. During the 2013-2014 school year, an average of 11.2 million low-income children ate a healthy morning meal each day at school, an increase of 320,000 children from the previous school year, according to FRAC’s School Breakfast Scorecard (pdf) on state trends and School Breakfast — Making it Work in Large Districts (pdf).”

Agriculture Secretary Tom Vilsack noted yesterday that, “It’s very encouraging to see more and more students participating in the school breakfast program. School meals now provide many of our nation’s public school students with over half of the food they eat every day, so it is especially important that these meals provide kids the nutrition they need to learn and grow. Healthier meals lead to healthier kids, which is why parents, teachers and doctors support them.” [See also, FACT SHEET: Healthy, Hunger-Free Kids Act School Meals Implementation].

Also with respect to nutrition issues, Peter Whoriskey reported on the front page of today’s Washington Post that, “The nation’s top nutrition advisory panel has decided to drop its caution about eating cholesterol-laden food, a move that could undo almost 40 years of government warnings about its consumption.

“The group’s finding that cholesterol in the diet need no longer be considered a ‘nutrient of concern’ stands in contrast to the committee’s findings five years ago, the last time it convened. During those proceedings, as in previous years, the panel deemed the issue of excess cholesterol in the American diet a public health concern.”

The Post article noted that, “While Americans may be accustomed to conflicting dietary advice, the change on cholesterol comes from the influential Dietary Guidelines Advisory Committee, the group that provides the scientific basis for the ‘Dietary Guidelines.’ That federal publication has broad effects on the American diet, helping to determine the content of school lunches, affecting how food manufacturers advertise their wares, and serving as the foundation for reams of diet advice.”

Today’s article added that, “Cholesterol has been a fixture in dietary warnings in the United States at least since 1961, when it appeared in guidelines developed by the American Heart Association. Later adopted by the federal government, such warnings helped shift eating habits — per capita egg consumption dropped about 30 percent — and harmed egg farmers [related graph].”

On a separate issue, Russ Parsons reported yesterday at the Los Angeles Times Online that, “Have farmers markets become too plentiful for their own good? That’s a question farmers and market managers have been asking for several years. And now there’s evidence that suggests it may be so.

“A new study by the Department of Agriculture finds that the rate of growth in the number of farmers markets nationally has slowed dramatically in the last five years.”

The article stated that, “The report, ‘Trends in U.S. Local and Regional Food Systems,’ finds that though the number of farmers markets nationally grew at an annual rate of 17% between 2002 and 2007, that rate has slowed to 5.5% per year since.

“Though most of the rest of the nation didn’t experience declines on the order of Southern California, where total revenue declined to $2.3 million in 2012 from $4.2 million in 2007 (measured in constant dollars), total revenue at all markets in the United States fell by 1% in real dollars during that period. That’s after having grown by 32% between 2002 and 2017 and 36% between 1997 and 2002.”

 

Agricultural Economy

The U.S. Department of Agriculture’s Economic Research Service (ERS) released its 2015 Farm Sector Income Forecast yesterday, 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.”

Highlights of the ERS forecast from yesterday can be found here at FarmPolicy.com Online.

In part ERS noted 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.”

ERS added that, “…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.”

Jesse Newman reported yesterday at The Wall Street Journal Online that, “The 2015 decline reflects a third straight year of declining prices for several major agricultural commodities, with an expected $6.7 billion drop in farmers’ corn receipts this year, the USDA said. Corn prices have slipped below $4 a bushel after soaring to more than $8 a bushel during the severe 2012 drought in the U.S. The tumble in prices follows consecutive record U.S. corn harvests in the past two years.”

“In Tuesday’s farm income forecast, the USDA projected a $2.2 billion drop in farmers’ receipts from oilseed crops, including soybeans. Soybean prices dropped 28% last year as favorable weather helped U.S. growers harvest the largest crop in history,” Ms. Newman said.

AP writer David Pitt reported yesterday that, “While some farmers renting land at higher prices will find it an unprofitable year, the statistics are not as dire as they may sound for farmers in general, since just two years ago income was at a record high, farm economists said.

“‘It’s neither happy times nor is the sky falling in terms of agriculture incomes,’ said Scott Irwin, an agricultural economist at the University of Illinois at Urbana-Champaign.”

The AP article noted that, “‘It’s making it a tight squeeze for the grain farmer,’ said Jerry Main, 76, who plants corn and soybeans on just under 500 acres in the southeast part of the state [Iowa]. ‘There’s a lot of negotiating going on between tenants and landlords trying to get cash rents reduced. I’m not hearing landlords are giving too much yet.’”

The World Agricultural Outlook Board released its monthly World Agricultural Supply and Demand Estimates (WASDE) report yesterday; some key variables for wheat, corn and soybeans have been highlighted at FarmPolicy.com.

Also yesterday, the National Weather Service tweeted that, “CA snowpack only at 19% of normal statewide. 18% of normal for Northern Sierra ‪#cawx ‪#cadrought

 

Trade

A news release yesterday from Sen. Deb Fischer (R., Neb.) noted that, “This morning, [Sen. Fischer] chaired a hearing of the Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security entitled ‘Keeping Goods Moving.’ Senator Fischer released the following statement after the conclusion of this morning’s hearing:

Today’s hearing was an important opportunity to examine the impact of service disruptions at our nation’s ports and the impact on our transportation supply chain. Given the real economic consequences of the ongoing port congestion on the West Coast, I’m calling for a swift resolution to the current negotiations. That way, businesses in Nebraska and across the country can quickly return to business as usual.”

Sen. John Thune (R., S.D.) also noted at yesterday’s hearing that, “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.”

Meanwhile, Vicki Needham reported yesterday at The Hill Online that, “A bipartisan group of lawmakers is ramping up pressure on the Obama administration to address currency manipulation or risk the completion of its trade agenda.

“Nine House and Senate members introduced legislation on Tuesday that would punish countries that alter their exchange rates to gain a global trading advantage, hurting U.S. workers and damaging competitiveness.”

See related updates yesterday from Sen. Debbie Stabenow (D., Mich.) and Rep. Rosa DeLauro (D., Conn.).

A Financial Times opinion item noted in part yesterday that, “We have seen this film before. The US Congress is threatening a trade war to punish ‘currency manipulators’, those it deems to be boosting their trade balance artificially at the expense of America. Ordinarily, a threat of legislative action like this folds in the face of a presidential veto. In the past this has resembled a good cop-bad cop routine. The White House would point to anger on Capitol Hill in order to persuade the likes of China and Japan to curb manipulation against the dollar.

“This time, however, the number of Democrats and Republicans pledging their support for legislation looks unusually potent. President Barack Obama rightly insists that dealing with currency devaluation should be separated from matters of trade. He must hold firm both on the Trade Promotion Authority he seeks from Congress — that enables him to submit ‘fast track’ deals to an up-or-down vote — as well as the Transpacific Partnership talks that are in their final stages. Both Atlantic and Pacific trade deals are at a crossroads. It would be a setback to global growth prospects if they were sabotaged by politics in the very country that initiated them.”

 

Biofuels

Eduardo Porter penned an article on the front page of the Business Section in today’s New York Times titled, “A Biofuel Debate: Will Cutting Trees Cut Carbon?

The article started by saying, “Does combating climate change require burning the world’s forests and crops for fuel?

“It certainly looks that way, judging from the aggressive mandates governments around the globe have set to incorporate bioenergy into their transportation fuels in the hope of limiting the world’s overwhelming dependence on gasoline and diesel to move people and goods.”

Keith Good