FarmPolicy

April 23, 2017

Sunday Update: Policy Issues; Ag Economy; and, Biofuels

Reminder: Only four reports left, FarmPolicy.com ends Friday.

Policy Issues

Reuters writer Christine Stebbins reported on Friday that, “U.S. farmers will have another week to enroll in the government’s new subsidy programs under the five-year farm bill, with the deadline extended to April 7, the U.S. Department of Agriculture said on Friday.

“The final day for farmers to update their crop acreage and yield history, the first step to qualify for the new subsidies, will be extended to April 7. The farmers had already had the deadline to update their acreage data extended by one month to March 31.”

Senate Ag Committee Chairman Pat Roberts (R., Kan.) indicated on Friday that, “It is evident USDA listened to the concerns expressed by producers at the Senate Agriculture Committee’s first hearing on the implementation of the 2014 Farm Bill. This step shows America’s farmers and ranchers that their government can work for them.”

Sen. John Hoeven (R., N.D.) noted on Friday that, “This deadline extension recognizes the complexities facing our nation’s farmers, and helps to ensure that they have the time and support they need to be successful.”

While Sen. Heidi Heitkamp (D., N.D.) stated on Friday that, “Programs in last year’s bipartisan Farm Bill I helped pass – like Agricultural Risk Coverage and Price Loss Coverage – play a crucial role in making sure farmers have the support they need to grow their crops and do their jobs, even in trying economic circumstances. That’s why it’s critically important that farmers across our state contact their local Farm Service Agency offices by April 7 so they can continue to feed families throughout North Dakota and around the world.”

Meanwhile, Secretary of Agriculture Tom Vilsack penned a column in Saturday’s Wall Street Journal and noted that, “The House Republican proposal to block grant the Supplemental Nutrition Assistance Program is ill-timed and ill-advised. SNAP, formerly known as the food-stamp program, provides a lifeline for senior citizens, persons with profound disabilities, and working families with children relying on part-time hours at a minimum-wage job. Four out of five SNAP recipients are children, people with disabilities, the elderly, or working adults who don’t make enough to make ends meet.

“As the economy improves, more people are moving off SNAP. Since participation hit its peak in December 2012, the number of people receiving SNAP benefits has declined by 1.5 million. Congressional Budget Office projections indicate a 2%-4% reduction in SNAP recipients annually for the next five years.”

Sec. Vilsack added that, “SNAP continues to reduce poverty in the meantime. More than 90% of SNAP recipients have incomes below the federal poverty level—that’s around $2,000 a month to support a family of four. More than 4.8 million Americans, including 2.1 million children, are lifted out of poverty when SNAP benefits are counted as income.

SNAP fraud and error rates are at or near historic lows, while every dollar invested in SNAP regenerates $1.74 in economic activity, according to a 2010 study by Moody’s Analytics.”

Sec. Vilsack also explained that, “Rather than arbitrarily taking a budget axe to a program with a proven record of effectiveness and declining costs, common sense tells us that we should instead be working together to put those SNAP recipients who can work back to work.

That is exactly what a bipartisan majority in Congress agreed to do when they passed the 2014 Farm Bill, which included $200 million for states to test and evaluate employment and training strategies that will move people off of SNAP in the right way—by helping recipients build comprehensive skill sets and then matching them with the good-paying jobs they need to be able to move off the program.”

Also on Saturday, Lydia Wheeler reported at The Hill Online that, “The fight over the labeling of genetically engineered food is heating up on Capitol Hill, as safety advocates mount a campaign to beat back industry-backed legislation that would leave the nation without a mandatory labeling standard.

“Rep. Mike Pompeo (R-Kan.) introduced the Safe and Accurate Food Labeling Act of 2015 last week with lead co-sponsor Rep. G.K. Butterfield (D-N.C.). The bill would create a voluntary federal labeling standard, while pre-empting states from passing their own mandatory labeling laws for genetically modified — or GMO — foods.”

The Hill update stated that, “While there is not yet legislation in the Senate, Pompeo said the measure has a path forward after years of debate over whether and how Congress should address concerns about the increased role of biotechnology in growing crops.

“‘This isn’t a messaging bill, this isn’t something the House intends to do so we can say we did it,’ he told reporters. ‘The idea is to get the Senate to move on roughly the same timeframe that we’re proceeding on.’

“Food safety advocates say lawmakers will ultimately balk at the bill once they discover its implications.”

On a separate issue, Sabrina Tavernise and Michael D. Shear reported in Saturday’s New York Times that, “President Obama on Friday urged Congress to double the funding to confront the danger of antibiotic-resistant bacteria, calling it a major public health issue that, if left unchecked, would ‘cause tens of thousands of deaths, millions of illnesses.’

“The administration also issued a new plan for attacking the problem, part of a national strategy that Mr. Obama laid out in an executive order in September. The plan calls for improved surveillance of outbreaks, better diagnostic tests and new research on alternative drugs. It also urges government agencies to bolster systems to track the consumption of antibiotics and to reduce inappropriate use in people and animals.”

The Times writers noted that, “Health advocates and many experts, however, remained unimpressed by the proposed actions on antibiotic use in animals.

“The Natural Resources Defense Council, an environmental advocacy group, said in a statement that the plan ‘continues to allow the routine feeding of antibiotics to animals that live in the crowded conditions endemic to industrial farms.’”

Thomas M. Burton and Tennille Tracy reported in Saturday’s Wall Street Journal that, “Sen. Lamar Alexander (R., Tenn.), chairman of a key Senate committee on health issues, said, ‘The President has focused on a real concern….The Senate health committee already is working to help spur the development of new and effective antibiotics. I look forward to reviewing the details of the President’s plan.’

“Some doctors noted that there have previously existed similar, but lower-profile, interagency plans regarding drug resistance at the Food and Drug Administration and other U.S. health agencies. But in this case, they noted, President Barack Obama’s budget calls for an additional $1.2 billion to be spent in the effort and, if enacted by Congress, that money can potentially make a difference.”

The Journal writers indicated that, “The White House plan proposes eliminating a farming practice in which cows, chickens and other food animals receive antibiotics to help them gain weight faster. This overuse is widely believed to have contributed to drug resistance.

“In late 2013, the FDA asked drug companies to voluntarily stop using antibiotics to promote animal growth. The Obama plan says the Agriculture Department should finance the development of alternatives to antibiotics that are used to treat diseases in livestock and poultry and promote growth.

“The White House effort comes as a number of meat processors and restaurant chains have voluntarily moved to reduce or eliminate antibiotics use in their meat supply in response to consumer preferences, rather than any regulations.”

Saturday’s article added that, “Meat and animal-drug-industry officials said the Obama administration plan largely matched what the industry is already doing to comply with the 2013 FDA guidance.”

In budget news, Jonathan Weisman reported in Saturday’s New York Times that, “Emerging from an all-night session that was more exhausting than dramatic, Senate Republicans on Friday squeaked through a budget blueprint that would repeal the Affordable Care Act, fundamentally remake federal health care for the poor and elderly, and push the federal deficit toward zero over the next decade…[T]he House passed its budget plan on Wednesday. Now, Senate and House negotiators hope to take similar tax-and-spending plans and negotiate the first common congressional budget in a decade.”

An update on Friday at the National Sustainable Agriculture Coalition Blog (NSAC) noted that, “Budget resolutions provide the blueprint for the appropriations process that will take place in the coming months. They set binding top line spending caps for the House and Senate Appropriations Committees.”

The NSAC update also reminded readers that, “In addition to setting out the spending caps for FY 2016 appropriations, the House budget uses the ‘budget reconciliation’ procedure to direct the Agriculture Committee to cut $1 billion over ten years from the programs under its jurisdiction (i.e., the farm bill). Budget reconciliation instructions require authorizing committees to meet a certain level of deficit reduction by a certain date. However, they do not dictate where those cuts should come from; that is left to the authorizing committees to decide.

“Unlike the House budget resolution, the Senate budget resolution does not contain reconciliation instructions. As the House and Senate conference their respective budget resolutions, NSAC will be urging congressional negotiators to adopt the Senate proposal not to include budget reconciliation instructions to the Agriculture Committees. If they are included, the House and Senate Agriculture Committees will quickly have to fashion bills that re-open the 2014 Farm Bill and cut funding.”

 

Agricultural Economy

The USDA’s Economic Research Service updated its Food Price Outlook, 2015 on Friday.

In part, the update stated that, “ERS revises its food price forecasts if the conditions (such as the feed grain crop outlook or weather-related crop conditions) on which they are based change significantly. Despite the effects of the 2014 drought in the Southwest and California, retail food price inflation rates approached the 20-year historical average of 2.6 percent per year. In 2014, the food-at-home CPI increased 2.4 percent. The most notable annual inflation increases were seen in the perimeter of the grocery store—retail beef and veal, pork, eggs, fish and seafood, dairy, and fresh fruit experienced above-average price increases. Alternatively, items in the center aisles of grocery stores experienced below-average inflation or, in some instances, even deflation. In 2014, prices fell for fresh vegetables, sugars and sweets, and nonalcoholic beverages. While overall food price inflation was close to its 20-year historical average, inflation across food categories covered a broad spectrum.

“Looking ahead to 2015, ERS predicts that supermarket (food-at-home) prices will see normal to slightly-lower-than-average food price inflation, increasing 2.0 to 3.0 percent.”

Also Friday, USDA’s National Agricultural Statistics Service released its Quarterly Hogs and Pigs report, which indicated that, “United States inventory of all hogs and pigs on March 1, 2015 was 65.9 million head. This was up 7 percent from March 1, 2014, but down slightly from December 1, 2014 [related graph].”

University of Illinois agricultural economists John Newton and Todd Kuethe indicated on Friday at the farmodoc daily blog (“The Footprint of Chinese Demand for U.S. Soybeans”) that, “Due in large part to record plantings and yield the U.S. produced 3.969 billion bushels of soybeans in 2014. Of this total, USDA’s March 10 World Agricultural Supply and Demand Estimates (WASDE) projects for the U.S. to export 1.79 billion bushels of soybeans during the 2014-2015 marketing year. The primary destination? China.

Thus far during the marketing year, nearly one out of every four bushels of soybeans produced, or 13 bushels per acre, has been shipped to China. While China’s economic growth reportedly slowed to 7.4 percent in 2014, their demand for soybeans is not expected to reduce immediately (or at all). For the current marketing year, USDA projects China to import 2.7 billion bushels of soybeans worldwide, up 5 percent from the previous year. Using the average U.S. soybean yield of 47.8 bushels per acre, China’s import demand for soybeans is equivalent to 57 million acres worldwide. For comparative purposes, U.S. farmers harvested 83 million acres in 2014. Put simply, as the world’s largest importer, China’s massive appetitive for soybeans is a significant driver of global, and domestic, soybean markets.

“Based on USDA’s March 23 Federal Grain Inspection Service (FGIS) report, U.S. soybean exports have totaled 1.604 billion bushels for the 2014-2015 marketing year (updated through March 19, 2015). Exports to China represent 65 percent of this total, at 1.049 billion bushels. Of course, China has not always been a major player in the U.S. soybean market. During the 1995-96 marketing year China imported approximately 18 million bushels of soybeans. Since that point, and driven by rapid double-digit growth in the Chinese economy, the Chinese have enhanced their position as an export partner with the U.S. and now demand more than a billion bushels of soybeans each marketing year (Figure 1).”

Also, Bryan Lohmar penned a recent article at Choices Online titled, “Will China Import More Corn?

Reuters news reported on Saturday that, “The U.S. Department of Agriculture on Saturday confirmed the third infection of a virulent strain of avian flu in a commercial poultry flock in Minnesota, the nation’s top turkey-producing state.

“A case of H5N2 flu was found in a flock of 39,000 turkeys in Stearns County, which is northwest of Minneapolis, according to a notice from USDA. State officials quarantined the infected farm, and birds there will be culled to prevent the spread of the disease.”

A news release on Friday from Sen. John Boozman (R., Ark.) stated that, “An amendment, offered by Arkansas Senators John Boozman and Tom Cotton, along with Delaware Senators Tom Carper and Chris Coons, that seeks to improve prevention and treatment measures that would mitigate the impact of virus outbreaks—such as the avian flu—on agriculture and the economy was approved this morning as part of the Manager’s Amendment to the Senate-passed FY16 Budget Resolution.”

 

Biofuels

The Congressional Budget Office on Friday released slides from a recent presentation by Ron Gecan, an analyst in CBO’s Microeconomics Studies Division, titled, “Issues Regarding the Renewable Fuel Standard.”

Keith Good

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