FarmPolicy

November 17, 2019

Friday Morning Update: Policy Issues; Lawmaker Perspectives; and, the Budget

Categories: Budget /Farm Bill

Policy Issues

David Rogers reported yesterday at Politico that, “The knives are out for the new farm bill even before next Tuesday’s deadline for producers to sign up with the Agriculture Department for the first commodity support payments due in October.

A spate of recent forecasts shows that costs will be higher than predicted given the drop in grain prices. But in the rush to judgment, one cardinal rule still applies: As thickheaded as the farm lobby can be, its critics are often thicker.

“The Environmental Working Group has asserted that corn growers in most counties of Ohio, Iowa, Minnesota and Kansas will cash in on payouts of $60 to $200 an acre. The Washington Post editorial page picked up on this number and came down hard: ‘Like so many of its predecessors, the 2014 farm bill promised cheaper, more efficient federal agricultural policy, but delivered the opposite.’”

Mr. Rogers explained that, “But when POLITICO went back and looked at the farm bill numbers, the picture that emerged was very different.”

Yesterday’s article stated that, “The $200 per acre estimate, for example, stems from confusion over a computer-generated graphic prepared by the University of Illinois to illustrate potential payments to corn farmers under the new Agricultural Risk Coverage program for the 2014 crop year that runs from last August through this July.

“The red portion of the map is keyed as representing counties with potential ARC payments between $60 and $200 per acre. But that was simply done to cast as wide a net as possible to capture all the high-cost results that might be spun out by the computer; it was never a conclusion in and of itself.

In fact, caps built into the design of ARC make it next to impossible to get anything approaching $200 per acre. Gary Schnitkey, the agriculture economist responsible for the map, told POLITICO that the highest county ARC payouts for corn were closer to $80 per acre. Schnitkey himself is betting that the five-year costs of the new commodity payments will average out to be lower than the prior system.”

Mr. Rogers continued: “If the window is widened to count more than the commodity title in the farm bill, two points also stand out.

First, for the decade from fiscal year 2015 through 2024, mandatory government spending for agriculture — including conservation and crop insurance programs — is expected to average substantially less than the average for the prior two decades.

Second, even with the current market turmoil, the cost estimates show a consistent ratio of about 20-to-1 between the relative size of the farm economy — measured in total farm cash receipts — and what government aid is promised.

“This is very different from past periods of market turmoil such as the late 1990s. Back then, the same numbers jumped around much more, with ratios of 10-to-1 and even 6-to-1.”

The Politico article noted that, “Each title should respond to price changes but in opposite ways. Commodity subsidies go up when markets fall. At the same time, crop insurance premiums should fall with prices because the crops are valued at a lower rate.”

Meanwhile, Reuters writer Christine Stebbins reported yesterday that, “About 25 percent of U.S. farmers have yet to make their final selections for the government’s new crop subsidies with the deadline to enroll less than a week away, the U.S. Department of Agriculture said on Thursday…[R]esponding to a Reuters inquiry, the USDA said in a statement that 94 percent of grain farmers had updated their crop history as of March 19, but only 77 percent had elected either ARC or PLC to complete their five-year eligibility for payments.

“‘We do not yet have a breakdown of how many have chosen ARC and how many PLC,’ USDA spokesman Cullen Schwarz added.”

The article pointed out that, “Late last month the USDA extended the deadline for farmers to update their farm history from Feb. 27 to March 31, matching the time to enroll in a specific subsidy program.

“‘No announcement yet on whether there will be an extension,’ Schwarz said.”

A news release yesterday from the House Ag Committee indicated that, “Today, Rep. Rick Crawford (R-AR), Chairman of the House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management held a public hearing to examine implementation of the 2014 Farm Bill.”

The release pointed out that, “Chairman Crawford cited the need for action by the Department to address the collapse in cotton prices due to actions taken by the Chinese government, stating, ‘USDA has the authority to address an issue that is making the marketing of cotton extremely difficult for cooperatives and marketing pools at a time when the markets are already beating them down.’ The Chairman called newly proposed ‘actively engaged’ regulations ‘arbitrary and capricious,’ noting that the regulation ‘ignores the remarkable diversity and complexity in agriculture today.’ And, the Chairman called on RMA Administrator Willis to ensure that margin coverage being developed works for rice growers.”

(Recall that Sec. of Ag. Tom Vilsack discussed the “actively engaged” proposal earlier this week on AgriTalk, transcript here).

Subcommittee ranking member Tim Walz (D., Minn.) noted yesterday that, “The 2014 Farm Bill paves the way for new crop insurance policies that farmers can use to better manage their risk. These efforts will be especially helpful for new and beginning farmers as well as crop growers.

“I am particularly curious to hear more about conservation compliance. Farmers want to be able to do more to maintain their healthy soil, and if there’s anything we can do to incentivize that, I’d like to hear about it. As I’ve said before, innovative production practices, like cover crops, ought to be encouraged.”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Texas A&M sent out an email earlier this week recommending farmers who used its on-line decision tool take the time go back in and run the model again. That was due to some changes in price projections for several crops that had shifted in recent weeks, said Joe Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M.

“‘All I said was things are changing and you might want to go back and run the numbers,’ Outlaw said. ‘That’s all I was trying to do.’

“Outlaw said it would only take producers a short time to rerun the projections. After all, FSA does allow you to go back and change your decisions before the deadline. A boost in prices for some crops has reduced or eliminated the possibility of PLC payments for the 2014 crops. Even though the long-term forecast might show that PLC would pay more for those crops over the life of the farm bill, that shift could change some thinking on program choices.”

The DTN update added that, “Outlaw’s email, however, did cause some concern by producers who thought they might have to revisit their earlier commodity-program choices. Art Barnaby, an agricultural economist at Kansas State University, said state Farm Service Agency offices were getting calls about Outlaw’s recommendation to check the on-line decision tool. So Kansas State’s Ag Econ staff put out a more extensive email recommending producers who used the Texas A&M tool to recheck their figures. A decision tool by Oklahoma State and K-State did not use prices as low as A&M and thus were less likely to get a PLC recommendation early on. Still, Barnaby said these shifts in price forecasts can cause a lot of short-term angst when trying to sign up for a five-year program.

“‘My conclusion is you can drive yourself crazy chasing a price forecast,’ Barnaby said. ‘It’s such a crapshoot when you spent a lot of time going through the numbers and now you are going to change because of a price forecast. I’m not sure that makes sense.’

Still, K-State recommended producers who have doubts should also take a look at the University of Illinois’s Farmdoc, particularly for a crop on the margins between ARC and PLC such as sorghum. Farmdoc estimates over the life of the Farm Bill, PLC will pay more than the ARC-CO for sorghum base.”

In other policy news, Sarah Wheaton and Chase Purdy reported yesterday at Politico that, “The Obama administration is about to release a long-awaited plan to fight the spread of antibiotic-resistant bacteria – but scientists and lawmakers are already dismissing it as too weak to make enough progress against one of the most urgent public health risks.

“The plan, which leaked Thursday ahead of its scheduled release on Friday, outlines specific goals for controlling the spread of ‘superbugs’ by the year 2020. It outlines actions to achieve five goals over five years: slowing the spread of resistant bacteria, strengthening surveillance, speeding the development of tests and new drugs, improving how government agencies work together on the issue, and expanding international efforts on the global health threat.”

The Politico writers noted that, “But critics were already dismissing the plan ahead of its planned release on Friday as too lenient on big farms giving drugs to animals – a major driver of antibiotic resistance — and doing little to spur the discovery of new germ-killing compounds.”

 

Lawmaker Perspectives: Chairman Conaway, Sens. Rubio and Klobuchar

House Ag Committee Chairman Mike Conaway (R., Tex.) was a guest on yesterday’s AgriTalk radio program with Mike Adams where the conversation focused on the Farm Bill and trade issues. An unofficial FarmPolicy.com transcript of this discussion is available here.

Mike Adams also spoke with Senator Marco Rubio (R., Fla.) where they covered immigration, trade and regulatory issues. An unofficial FarmPolicy.com transcript of that discussion can be found here.

And Senator Amy Klobuchar (D., Minn.) was also on yesterday’s AgriTalk program where she discussed the Farm Bill, trade, and the proposed Waters of the U.S. rule from EPA. An unofficial FarmPolicy.com transcript of that discussion can be found here.

 

Budget

Seung Min Kim and Rachael Bade reported yesterday at Politico that, “Senate Republicans corralled enough votes from fiscal conservatives and defense hawks to pass their budget on Friday, scoring a win for the new GOP majority and setting the stage for high-stakes negotiations with the House over a final budget deal.

“After a marathon voting session that stretched into the morning hours on Friday, the Senate passed its spending blueprint, 52-46.”

Keith Good

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