On Thursday, the Federal Reserve Bank of Chicago released its latest edition of the AgLetter, which stated that, “Farmland values in the Seventh Federal Reserve District experienced an annual decrease of 3 percent for 2015, matching the yearly decline for 2014. Furthermore, ‘good’ farmland values in the fourth quarter of 2015 were down 1 percent from the third quarter, according to 199 survey respondents representing agricultural banks across the District. Nearly 60 percent of the survey respondents anticipated agricultural land values to decrease during the January through March period of 2016, while none expected agricultural land values to increase in the areas surrounding their respective banks.”
Yesterday’s AgLetter report noted that, “Along with slumping agricultural prices, the deterioration of agricultural credit conditions extended into the fourth quarter of 2015. Repayment rates on non-real-estate farm loans were much lower in the October through December period of 2015 than in the same period of the previous year.”
More broadly, the Chicago Fed explained that, “There was a strong sentiment among survey respondents that the downward trend for capital spending on farm- land or land improvements, buildings and facilities, machinery and equipment, and trucks and autos would continue into 2016. Moreover, 59 percent of the responding bankers anticipated farmland values to decline further in the first quarter of 2016, and none anticipated them to rise.”
Reuters writer P.J. Huffstutter reported on Thursday that, “Access to such credit tightened in the fourth quarter, and is expected to continue to be squeezed in 2016, as the rate of farmers repaying existing loans slows and the value of their land falls, according to the quarterly farm economy surveys from the Fed banks of St. Louis, Kansas City and Chicago.
“The findings come as the U.S. farm economy continued a downward slide in the fourth quarter of 2015. A strong dollar, sluggish export demand and a glut of grain have kept bearish clouds over the sector and dragged down wheat prices to nearly six-year lows.”
In a related development on the value of the dollar, a news release on Friday from Sen. Heidi Heitkamp (D., N.D.) indicated that, “[Sen. Heitkamp], a member of the Senate Committee on Banking, Housing, and Urban Affairs, pressed Federal Reserve Chair Janet Yellen about the impact of the strong dollar value on commodity prices – particularly agriculture and energy commodities which are crucial to North Dakota’s economy – as Yellen testified before the Committee on her Semiannual Monetary Policy Report to Congress.”
Click here for video of Heitkamp questioning Yellen during the hearing in the Senate Committee on Banking, Housing, and Urban Affairs.
Meanwhile, the Federal Reserve Bank of Dallas recently indicated that, “District land values increased this quarter [4th Quarter, 2015]. Irrigated cropland saw the largest increase; real irrigated land values were up 4 percent over last quarter. Real ranchland values were up 3 percent over the third quarter, while real dryland values were up 1 percent. All land values were up about 2 percent from year-ago levels.”
Cash rents also moved up slightly:
More specifically with respect to Texas land values, a recent New York Times article stated that, “In Texas, where wealth is measured not in dollars but in acres, land prices have for decades followed the price of oil. ‘There is this ongoing love for the land among Texans, to the point that if you are a Texan who gets wealthy, one of the first things you start to look at is a ranch,’ said Charles Gilliland, a research economist with the Real Estate Center at Texas A&M University.
“Oil money helped drive statewide rural land prices to a record high of $2,354 an acre in 2014 — more than double the price per acre in 2004.”
The Times article added that, “Now, after the collapse of oil prices from more than $100 a barrel 18 months ago, [Jay Ellis, an investment fund founder] is wagering that this link between land and oil will create opportunities to buy premium ranches at 2008 and 2009 prices, or about a 25 percent discount.”
Today, the Federal Reserve Bank of St. Louis released its Agricultural Finance Monitor, which contained a summary of survey data on agricultural credit conditions for the eighth federal reserve district in the fourth quarter of 2015.
The Fed report stated that, “According to the latest survey of agricultural bankers in the Eighth Federal Reserve District, farm income continued to weaken in the fourth quarter of 2015 compared with the same period a year earlier. Proportionately more bankers expect further declines in farm income in the first quarter of 2016 relative to a year earlier. Similar to our previous survey, large majorities of bankers reported that household spending and farm expenditures on capital goods continued to decline in the fourth quarter and will likely continue to do so in the first quarter of 2016. Eighth District land values declined in the fourth quarter from a year earlier.”
More specifically with respect to farmland values, today’s report pointed out that, “Although the fourth-quarter decline (2.5 percent) was about equal to the previous quarter’s decline, it was the third decline in the past four quarters.”
On the issue of cash rents, the Fed stated that, “Cash rents for quality farmland fell by 9.5 percent in the fourth quarter of 2015 compared with a year earlier; this decline was the largest in the relatively short history of the survey. By contrast, cash rents for ranchland or pastureland rose by 8.6 percent in the fourth quarter after increasing by 2.5 percent in the third quarter. Bankers expect that cash rents for both quality farmland and ranchland or pastureland will decline in the first quarter of 2016, as indicated by their index values of 52 and 58, respectively.”
The Fed report also incldued this overview: “Farmland returns are defined as rents less expenses divided by the market value of the land. Although farmland returns are thus dependent on many factors, a little more than three-quarters (77 percent) of bankers reported that they expect returns in 2016 to be positive, but less than 5 percent. Thirteen percent expect returns greater than 5 percent but less than 10 percent, while 10 percent expect farmland returns to be negative in 2016.”
Meanwhile, the Federal Reserve Bank of Kansas City indicated today (“Farm Economy Tightens Further”) that, “Farmland values in the Tenth District dipped again in the fourth quarter. According to respondents of the Tenth District Survey of Agricultural Credit Conditions, values of nonirrigated and irrigated cropland decreased 4 percent and 2 percent, respectively, from a year ago (Chart 1). With the fourth quarter declines, irrigated cropland values have fallen modestly in four consecutive quarters, and the value of nonirrigated cropland generally followed the same trend through 2015.”
The KC Fed report noted that, “Survey respondents expected farmland values to fall further in the coming months.”
And on cash rents, the KC Fed indicated that, “Similar to farmland values, cash rents softened in the fourth quarter.”
On the broader issue of farm income, today’s report explained that, “Bankers expected farm income to remain subdued in the coming months.”
For more detail on the 2016 farm income forecast from USDA, just click here.
Jesse Newman reported today at The Wall Street Journal Online that, “Farmland values dropped across much of the Midwest in the fourth quarter, according to Federal Reserve reports on Thursday, a symptom of continued weakness in the agricultural sector fueled by several years of depressed crop prices.”
Today’s Journal article stated that, “The reports reflect a continuing downturn in the U.S. farm economy, which has been marked by listless crop prices and softer demand for agricultural land after prices for both shot higher for much of the past decade. The yearslong farmland boom was fueled by drought and growing demand for grain from ethanol producers and foreign importers.”
Yesterday, USDA’s Economic Research Service (ERS) updated its 2016 farm income forecast. The ERS farm income data estimates are released three times a year, including February, August, and November.
ERS explained that, “Farm sector profitability is forecast to decline for the third straight year. Net cash farm income is forecast at $90.9 billion, down about 2.5 percent from the 2015 forecast levels. Net farm income is forecast to be $54.8 billion in 2016, down 3 percent. If realized, 2016 net farm income would be the lowest since 2002 (in both real and nominal terms) and a drop of 56 percent from its recent high of $123.3 billion in 2013.”
Yesterday’s update indicated that, “Nearly all major animal specialties—including dairy, meat animals, and poultry/eggs— are forecast to have lower receipts, as are vegetables/melons and feed crops,” and added that, “Direct government farm program payments are projected to rise $3.3 billion (31.4 percent) to $13.9 billion in 2016 in response to the expected price environment.”
Meanwhile, “Farm asset values are forecast to decline by 1.6 percent in 2016, and farm debt is forecast to increase by 2.3 percent.”
ERS also noted that, “Most farm households earn all of their income from off-farm sources—median off-farm income is forecast to increase 4.1 percent to $75,354 in 2016.”
With respect to production expenses, in a broader analysis, ERS stated yesterday that, “In 2016, the drop in expenses [$3.8-billion (1 percent)]is expected to alleviate, but not completely offset, the drop in cash receipts, and ultimately lead to tighter margins.”
More specifically with respect to cash rents, the income report indicated that, “Net rent expense—the amount paid to rent land, adjusted for the landlord’s share of government payments and insurance indemnities and net of any expenses paid by the landlords—is forecast to increase by 2.9 percent to $21 billion in 2016. As in recent years, the majority of net rent expense is forecast to be paid to nonoperator landlords as opposed to landlords who are also operators.”
With respect to the projected 31.4% increase in farm program payments, ERS noted that, “The new Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs, introduced in the 2014 Farm Bill, are expected to account for almost two-thirds of direct payments to farm operations.”
In a separate look at some financial variables, ERS also noted yesterday that, “Farm real estate values have increased rapidly in recent years as high crop prices and low interest rates led to strong demand for farmland and buildings. With a third straight year of lower commodity prices and income forecast in 2016, farm real estate values are expected to decline modestly.”
Wall Street Journal writer Jesse Newman reported yesterday that, “Farm incomes are declining because prices for corn, soybeans and wheat have fallen sharply after three straight years of bumper U.S. crops and rising output elsewhere in the world. Overseas demand for some U.S. crops also has cooled, in part because of the strong dollar.”
Bloomberg writers Alan Bjerga and Jeff Wilson reported yesterday that, “The 2013 boom spurred farmers to boost crop and livestock production, triggering a cycle for surpluses in major agricultural commodities at the same time, David Anderson, a livestock economist at Texas A&M University in College Station, said in a telephone interview. Farmland values have dropped from all-time highs.”
Des Moines Register writer Christopher Doering reported yesterday that, “Still, Agriculture Secretary Tom Vilsack said the drop ‘is an improvement from the double digit declines seen in 2014 and 2015. It reflects a more competitive trade environment, softening projection for global demand and a continuation of the dip in agricultural commodity prices.’”
Regarding soybean prices, the WASDE report stated that, “The 2015/16 season-average soybean price range projection is unchanged at $8.05 to $9.55 per bushel.”
In a separate Wall Street Journal article from yesterday, Jesse Newman explained that, “Grain prices fell to multiweek lows Tuesday after federal forecasters raised their outlook for U.S. stockpiles amid sluggish overseas demand.
“Corn futures reached a more-than three-week low, while wheat dropped to the lowest level in more than two months.”
And recall that earlier this month, the Food and Agriculture Organization of the United Nations (FAO) indicated that, “The FAO Food Price Index fell in January, slipping 1.9 percent below its level in the last month of 2015, as prices of all the commodities it tracks fell, sugar in particular.”
The FAO report pointed out that, “The main factors underlying the lingering decline in basic food commodity prices are the generally ample agricultural supply conditions, a slowing global economy, and the strengthening of the US dollar.
“This month, FAO also raised its forecast for worldwide cereal stocks in 2016, as a result of lowering its projected consumption and raising 2015 production prospects.”
I remember the time in 2002 I tried to explain to my wife an idea I had about summarizing newspaper articles relating to farm policy issues for busy people at work who didn’t have time to read as much as they wanted to.
Now the time has come to stop writing the daily reports.
Thanks so much to the over 200 individuals who took time the past couple of weeks to share with me their appreciation for the reports; here are reflective examples of what these very thoughtful notes from readers said:
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“Your willingness to provide this early-morning update day after day, without fail, has been a wonderful contribution.”
“I have marveled at the discipline and effort required to bring ‘farm policy’ to my east coast desk early in the day.”
“Your daily surveys are the best-written, most comprehensive, and most objective news source that I have seen for a long time.”
“In addition, your integrity in reporting is deeply appreciated. There is a lot that gets said in ag circles, and you screened out the chaff. Your accuracy in reporting was always highly valued as well. Only you could have provided that unique combination of an ag economist, an ag attorney, and a journalist. The ag community has richly benefited from your dedication and commitment to FarmPolicy.com.”
“Distilling the information from numerous sources, sites, and newspapers is an overwhelming task that you accomplished with great professionalism. What you provided was accurate, complete, and extremely valuable.”
And Rep. Adrian Smith (R., Neb.) tweeted yesterday: “Thank you to Keith Good for his years of #ag reporting. Sad to see @FarmPolicy end, but I wish him all the best in his new chapter.”
Adam Nagourney reported on the front page of today’s New York Times that, “Gov. Jerry Brown on Wednesday ordered mandatory water use reductions for the first time in California’s history, saying the state’s four-year drought had reached near-crisis proportions after a winter of record-low snowfalls.
“Mr. Brown, in an executive order, directed the State Water Resources Control Board to impose a 25 percent reduction on the state’s 400 local water supply agencies, which serve 90 percent of California residents, over the coming year. The agencies will be responsible for coming up with restrictions to cut back on water use and for monitoring compliance. State officials said the order would impose varying degrees of cutbacks on water use across the board — affecting homeowners, farms and other businesses, as well as the maintenance of cemeteries and golf courses.
“While the specifics of how this will be accomplished are being left to the water agencies, it is certain that Californians across the state will have to cut back on watering gardens and lawns — which soak up a vast amount of the water this state uses every day — as well as washing cars and even taking showers.”
Today’s article explained that, “Owners of large farms, who obtain their water from sources outside the local water agencies, will not fall under the 25 percent guideline. State officials noted that many farms had already seen a cutback in their water allocations because of the drought. In addition, the owners of large farms will be required, under the governor’s executive order, to offer detailed reports to state regulators about water use, ideally as a way to highlight incidents of water diversion or waste.
“Because of this system, state officials said, they did not expect the executive order to result — at least in the immediate future — in an increase in farm or food prices.”
A news release yesterday from USDA’s National Agricultural Statistics Service (NASS) stated that, “For a second year in a row, U.S. growers are raising the bar on soybean acreage. Growers across the United States intend to plant an estimated record-high 84.6 million acres of soybeans in 2015, [related graph], according to the Prospective Plantings report released today by [NASS].”
Yesterday’s release added that, “NASS today also released the quarterly Grain Stocks report to provide estimates of on-farm and off-farm stocks as of March 1. Key findings in that report include:
“- Corn stocks totaled 7.74 billion bushels, up 11 percent from the same time last year. On-farm corn stocks were up 13 percent from a year ago, and off-farm stocks were up 7 percent.
“- Soybeans stored on farms totaled 1.33 billion bushels, up 34 percent from March 1, 2014. On-farm soybean stocks were up 60 percent from a year ago, while off-farm stocks were up 18 percent.”
University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdoc daily blog (“USDA Stocks and Acreage Estimates Smaller than Expected for Soybeans and Larger than Expected for Corn”) that, “Compared to pre-report expectations, the March 1 soybean stocks and 2015 planting intentions estimates represent modestly friendly surprises. On the other hand, the stocks and planting intentions estimates represented modestly negative surprises for the corn market. Part of the negative corn price response to the estimates likely reflects inflated trend yield estimates for 2015 and perhaps an incorrect interpretation of the pace of feed and residual use during the first half of the marketing year. Attention will now turn to spring weather and planting progress.”
The interview, which focused on the Farm Bill, trade, regulations, and biotech issues, was recorded last week and was conducted before a group of Farm Bureau members from Missouri, Minnesota, Iowa, and Texas.
House Ag Committee Ranking Member Collin Peterson (D., Minn.) was a guest on Monday’s AgriTalk radio program; the conversation with Mike Adams focused on the Farm Bill, trade, regulations, and biotech issues.
The interview that aired on Monday’s program was recorded last week and was conducted before a group of Farm Bureau members from Missouri, Minnesota, Iowa, and Texas.
This is an unofficial FarmPolicy.com transcript of that discussion.
Mr. Adams: Last week in Washington, D.C., had an opportunity to talk with Congressman Collin Peterson, Ranking Member of the House Ag Committee. We talked about a number of issues, starting off with how he feels it’s going with the new dairy program, and was he happy with the signup.
Rep. Peterson: Well, I think relatively. You know, I think we could have had a higher turnout, but—or signup—but coming off one of the best years in dairy for a long time, and I think people looking at what’s going to happen this year, kind of figuring, well, might be payments, there might not, so they decided, some people decided to forego it. I think you’re going to see a lot more people sign up, the way things are looking, for next year.
And that’s one good thing about the dairy program: you don’t have to lock in for five years, you can sign up every year. And given what’s been going on, I think I’m not as worried as I was about us not having the program in there to try to limit production, if it gets out of control. It looks like that’s not going to be necessary anyway, so that was a maybe a fight we didn’t need to have.
Mr. Adams: We’ve had a lot of talk here this afternoon about trade. You have expressed some concerns about trade deals, and making sure that we’re protected. When you see what’s happening with TPP and the ongoing debate over TPA, what are your thoughts?
Rep. Peterson: Well, you know, I opposed NAFTA vigorously, and we had it defeated for a while. We were told, at the time, that we were going to have twice as many ag exports in NAFTA as we had imports, and what I predicted ended up happening—we had twice as many imports as we had exports under NAFTA. We had a problem in sugar that we’ve somewhat resolved now, but we had to work through that.
So one of my big issues with the TPP is that we finally solved some of the problems that were caused by NAFTA, and if we don’t solve it in the TPP, we’ll never solve it. And one of the biggest problems is dairy. And it’s Canada dairy. A lot of people aren’t focused on this, and a lot of people don’t even know about it.
But in the NAFTA, we allowed the Canadians to keep their supply management system. And so if you dairy farm in Canada, you are making a lot of money, considerably more than you make in the United States. Also, when we try to sell dairy products to Canada, there’s a tariff, but when they sell to us there’s no tariff. So the result of that has been, because the Canadian system can’t grow, and they’re making all this money in these co-ops, we now have the Canadian co-ops in Quebec owning—they’re No. 1 and 3 in ownership of dairy processing in the United States. That’s the effect of what we did.
And it’s got to be fixed, or at least get on a path to be fixed, in this deal for me to support it. So that’s one of my main issues. Also it applied—poultry and eggs are also supply managed in Canada. I’m not as familiar with the economics of that as I am of dairy. But that’s the big issue.
Another big issue is getting access in the Japanese market for beef and rice. Now, Froman sat in my office and said we will get a pathway or get changes in the Canadian supply management system, and we will get access to the Canadian rice and beef market or we won’t have a deal. And I said, well, you’re saying to me that we’re not going to have a deal, because I am very skeptical that the Canadians will be able to agree to anything in the supply management area.
Mr. Adams: RFS. We’re waiting for that announcement from EPA. Are you getting any feeling one way or another where they’re going with it?
Rep. Peterson: I don’t know. I’ve had so many meetings with the White House, with the EPA. You know, we have some speculation, I guess, but it could be wildly off. I don’t know, it just looks to me like maybe they’re going to lock in for three years and around 14.4 billion, but I really don’t know. We’re going to have to wait and see what they come out with.
I hope they don’t screw up the ethanol industry. That would be…you know, we’ve finally been able to balance the marketplace in corn and get the pricing situation at a more reasonable level. But if they screw up the RFS and we lose ethanol in this country, we’ll be back to $2 corn, and that ain’t gonna work very good with the prices that we got, land and inputs right now.
Mr. Adams: Is this EPA out of control?
Rep. Peterson: Yes. [Laughter.] [Applause.] Well, and, you know, the problem is they don’t understand a lot of these issues. They just don’t. This Waters of the U.S., I’ve had Gina McCarthy in my office three times. She thinks she’s helping you. I just want you to know. And she sincerely believes that, that she’s somehow or another clarifying the wetland determinations with what she’s doing.
And she doesn’t know enough about all the problems that we’ve been through to understand that what they’re doing is putting, actually, one more chink in the thing that we never will get this determined, you know, so I don’t know. It’s…I don’t know what you do to fix this, but it’s a big problem.
Mr. Adams: We were talking with the Chairman earlier. Is this Congress willing to step in and stop funding things like WOTUS if they keep pushing it?
Rep. Peterson: Yeah, I think so. I think the first thing we’re going to try, as I understand it, is to use the Congressional Review Act, which has never been used, but it was put in place some years ago, with my support, that says that the Congress can stop a rule within 60 days after the final rule is published. So the first thing that I think we’re going to try to do is we’re going to bring it up under the Congressional Review Act. I think we can pass…or stop it in the House. I don’t know about the Senate, but, you know, hopefully we can do it over there, too.
If we aren’t able to do that, then we’re going to try to deal with it in the Appropriations Committee, somehow or another. We have a bill, you know. We’re going to try any way we can. We’ve got to stop this. This is a bad idea.
We still haven’t—in Minnesota, I don’t know about the rest of the country—but we still haven’t resolved the blue dots and yellow dots from the ’85 Farm Bill. We’ve still got people out there that haven’t gotten determinations from that. And we’ve got four agencies deciding what a wetland is, and in Minnesota we’ve got a wetland law at the state level, so you’ve actually got five people, and you can’t ever figure out what the bottom line is. So, you know, we don’t need this. This is just going to be a big problem.
Mr. Adams: We have a major lawsuit in Iowa over runoff. Regardless of how this turns out on this particular one, is this the future, we’re looking at this type of litigation and threat of litigation moving forward for farming?
Rep. Peterson: I don’t know. I mean, we…the way we’ve set up some of the, you know, the NEPA law, National Environmental Policy Act, you know, these things that have been put in place back in the ‘70s, Endangered Species, these things need to be overhauled, because they’re basically set up to help people that want to sue and try to change the policy through lawsuits and so forth, and there just needs to be more balance put into it.
Frank Lucas and I last week passed the Science Advisory Act for the EPA, and there was another bill that Lamar Smith had on the secret science bill that we passed last Congress, too. You know, in the EPA, I mean, I had the local guy back home come to the Rotary Club and go after me because I was trying to get a balanced, scientific advisory committee at the EPA, that this was going to destroy the environment.
And I said, well, this advisory committee has no authority to do anything, they’re strictly advising the administrator; why wouldn’t you want to hear all points of view? Why would you want to limit it to a bunch of egghead professors, which is what they’ve done, and three-fourths of the people that are on this advisory committee are getting grants from the EPA to tell them what they already want to hear. And then you wonder why the thing is screwed up? You know, but anyway. [Applause.]
Mr. Adams: One more question and we’ll turn it over to the audience.
Rep. Peterson: I’m not running for President. [Laughter.]
Mr. Adams: Yeah. [Laughs.] Well, we cleared that up. Okay, all right. Biotech labeling. National standards or leave it up to the states?
Rep. Peterson: Well, we need a voluntary label, national. We need to preempt these states from setting their own, you know, own laws. The last thing we need is to have 50 different states have 50 different labels. That’s not workable. And we had a good hearing yesterday. We got some people criticized it.
But, you know, the reality is, you know, I’ve told some of these big companies that if Vermont is successful with this appeal to their lawsuit, and they are allowed to go ahead with their labeling law, I wish that these big companies would just not sell to Vermont, and let them understand what the effect of what they’re doing is.
The same thing in California. I don’t want them to fix the egg problem. If those people created that problem, and I hope they run out of eggs, and I hope eggs go to 20 bucks a dozen, you know, so people figure out what’s going on, you know, so… [Applause.]
Mr. Adams: Congressman Collin Peterson, Ranking Member of the House Agriculture Committee, speaking last week before a group of Farm Bureau members from Missouri, Minnesota, Iowa, and Texas.
“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.”
Senator Marco Rubio (R., Fla) was a guest on Thursday’s AgriTalk radio program with Mike Adams, where the conversation focused on immigration, trade, and regulation.
This is an unofficial FarmPolicy.com transcript of their discussion.
Mr. Adams: Welcome back to AgriTalk here in Washington, D.C. Yesterday I had the opportunity to talk with Florida Senator Marco Rubio. We had an exchange back and forth, difference of opinion on Cuba. We also talked a number of ag issues. But I started off asking Senator Rubio does he have any plans, any announcements coming about possibly running for President.
I have to start off—I mean, you’ve got a great setting here, this is going to be on the radio—we keep a pretty good secret. We wouldn’t let it get out of this room. Do you want to make any announcements while you’re here?
Sen. Rubio: Yes, I do. I do. I saved a bunch of money by switching to Geico. [Laughter.] That’s actually not true, I’m still on State Farm, but I thought it was funny, you know. [Laughter.]
Mr. Adams: Be careful Brian Williams, in how you tell your stories now, okay? We don’t want you to get in trouble. Well, we’re so glad that you are with us. And let’s just talk for a little bit and then we’ll open it up to the audience. We just heard from Chairman Conaway his thoughts on how we can address the immigration issue. I know you’re very involved in this.
We look at it in this group, I think, two different ways. Obviously we want to get some kind of resolution nationally, but there’s also the ag labor component to this we’re trying to get resolved as well. How do we approach it? Does it have to be all or nothing or can it be piece by piece?
Sen. Rubio: Well, a couple points. First of all, it’s a critical issue with regards to workforce, and that’s true all over the country. Virtually, there’s no sector—there are some mechanized sectors in agriculture, but by and large agriculture is reliant upon labor. And I’ve actually met some of these folks, both in Florida and in other parts of the country, in South Carolina very recently, in a peach operation, that are dealing with labor problems.
We need a reliable system that allows us to bring to this country, on a seasonal or year-round basis, temporary workers who want to work in agriculture, but do not want to be here permanently—and those are millions of people. And there’s a recognition of that in this country. I think there is a broad recognition of that, that we need to address that. The problem is that it has been wrapped up in the broader issue of immigration, which is much more complex.
Now I would start by saying there’s a significant amount of people in this country illegally who quite frankly never want to be citizens, do not want to be permanent residents, they just want to work for nine months out of the year, or six months, or eight months, they want to go back home for a period of time, and they want to come back again next year when their labor is needed. But they’re afraid to leave because if they do, they’re going to have to sneak back in again next year, so they stay. Because again, we don’t have a cost effective program that works for every part of agriculture, and that has to be fixed.
I personally worked on negotiating the differences out there between different ag groups across the country, those who represent farm workers, on a program as part of the comprehensive approach. But the lesson of 2013 and our efforts is that you’re not going to be able to deal with something like immigration in one massive piece of legislation. And the primary reason for it is because there is the belief in this country, increasingly, rightfully so, that any massive piece of legislation will never follow through on the enforcement pieces.
And so if you do something to deal with ten million people that are here illegally, unless you enforce the law, you’re going to have ten million more a decade from now, and people aren’t prepared to do that. So I think the key to doing anything on immigration is to prove to the American people that we’re serious about enforcing our immigration laws, but as part of that, one of the things that would really relieve the pressure is to have a system that allows people to come here legally and work when their labor is necessary, and return back to their home country, and return again in the future if their labor is needed again, as it will be. And so I do have hope that we can deal with that.
And if we were only dealing with that issue, I think we could make tremendous progress. The problem has been that many advocates for immigration reform want it all or nothing, because they’re afraid that the minute agriculture gets what it wants, it will stop lobbying on behalf of immigration reform; the day technology companies get what they want, they’ll stop lobbying, and so forth, so they want to hold everyone together as a coalition, and that’s been the impediment.
Mr. Adams: The next topic—and I assume you and I are probably going to disagree on this—I just disagreed with Chairman Conaway, so…
Sen. Rubio: Yeah, okay.
Mr. Adams: Let’s talk Cuba. The President’s pushing to open up Cuba. Agriculture groups want to do more trade with Cuba. How do you feel about it?
Sen. Rubio: Well, first of all, there are agricultural goods that are allowed to be sold in Cuba, but they’re not allowed to do it on credit, and there’s a reason why: they don’t pay. And that’s a big problem. The second point I would make is the following. My interest in Cuba—this is my only interest in Cuba. I want Cubans to be free in a democracy.
I believe, in addition to my personal connection to the issue, I believe it is bad for the national security of the United States to have an anti-American dictatorship 90 miles from our shores. I’ll support any policy towards Cuba that achieves that goal.
I do not believe that a unilateral opening to Cuba will achieve that goal, for the following reason: there is no such thing as the Cuban economy. The entire Cuban economy is owned by the Cuban government, primarily the Cuban military, through a holding company by the name of GAESA, G-A-E-S-A. They own everything. They own the hotels, they own the farms, they own everything.
To do business with Cuba requires you to do business with the military dictatorship. And doing business with them is not a two-way street. It is they will pick and choose who they allow in, what they allow in on their terms, and they will not allow anything in that could provide any sort of democratic opening on the island, which is what I primarily care about in terms of the future of the Cuban people.
And that’s my concern, that you’re going to have a leadership transition, because the actuarial tables tell you that the current leaders, who are all over 80 something years of age, will not be there forever. And I want us to have leverage to be able to say if you want a better relationship with the United States, we need to see these things: we need to see independent political parties, we need to see the ability of people to organize themselves and speak openly, and have freedom of the press, and so forth. If you give these things away without any of those openings, what leverage do you have in the future for that?
And here’s one more point I would make. Every single piece of farmland in Cuba today, every major agricultural property in Cuba today was once owned by a private owner, including American companies. They were stolen. They were confiscated. There’s $7 billion worth of American claims on the island of Cuba that we were never compensated for.
If you allow the import—this is the reverse of perhaps what the farm bureaus around the country want—if you allow the import of agricultural goods from Cuba to the United States, you are allowing them to traffic in stolen goods. They stole someone’s farm, they stole someone’s equipment, and they’re now going to make a profit off what they stole without compensating, including American companies—United Fruit Company—but also individuals.
You know, my family comes from a farming background in Cuba. They weren’t landowners, they were sharecroppers. They grew tobacco. But that property today is completely in the control of the Cuban government. There’s no profit motive. That’s why Cuban cigars are no longer any good. But the point being that that’s a factor that no one’s talking about. There are $7 billion worth of claims that are completely uncompensated.
Imagine if someone came in and stole your farm and 15 years later, they are growing crops on that farm and selling it to the country you went to for a profit, using the things you…your land, your equipment, what you invested in. That’s another part of it we haven’t discussed.
Mr. Adams: In case you do have aspirations for another job somewhere down the line, what would you say to agriculture? Many in agriculture and other parts of the country not really familiar with you or your policies or what you would push for if you got that new job. What can you tell this group about your ag positions?
Sen. Rubio: Well, first of all, as I said, I have a family connection. My grandfather was the single greatest influence on my life growing up, and it all entailed…you know, he was one of 17 children. Was a labor program, I guess, that they were undergoing, but… [Laughter.] He was the only one that couldn’t work on the [field]. He had polio when he was six years old, so he actually went out and learned how to read and write, and struggled because he was disabled from polio.
But nevertheless, Florida is an enormous agriculture state. People associate Florida with real estate, no income tax, and Walt Disney World. All are great—and beaches. But we have an enormous ag component. And it’s one that’s endangered by a number of things.
First of all, by unfair trade practices that we see, whether it’s dumping of tomatoes from Mexico or some of the other issues. But the other issue we’ve really begun to face is both environmental regulations from the EPA—we had a [numeric] nutrient content fight a year ago where they basically tried to come in and impose standards that would make the water even cleaner than what comes out of your tap, in some instances, on agriculture.
And the other threat we face is invasive species. And in particular we’re having a problem now—we’ve got a [canker] problem in Florida that almost wiped out the citrus industry, and now we have a greening problem that actually—the canker ruined the fruit, the greening destroys the trees.
And the problem with losing agriculture is when you lose agricultural land and it becomes developable now because it becomes the highest, best use, you can never get it back. Once someone builds a multifamily housing complex on a piece of agricultural land, you can never come back ten years later and turn it back into farming. And that’s a major problem. You lose the capacity to grow food and to feed your people.
We take that for granted in the United States. We have a lot of people in this country that, when you ask them where does food come from, they’ll say the supermarket. They don’t realize that someone had to grow it. And we take for granted that we have a plethora of food and that we have it in what’s basically still affordable in comparison to the rest of the world, although prices have gone up a little bit, but not necessarily because of agriculture’s fault. And we take that for granted. Food security is even more important than energy security in terms of the future of our country. And if you lose the capacity to feed your people, not to mention export and provide products to others, you lose a major component of your economy.
So what are the threats from government in that regard? The first, of course, is these environmental regulations. The second, for example, is the interpretation of existing law from regulatory agencies like the Waters of the United States issue that we’re trying to address in the budget.
And the third role government can play is with basic research. This greening issue, as I pointed out, is something that the University of Florida, through a program called [IFAS], has been doing round the clock research to try to fix. If we don’t fix that issue, it is not unforeseeable that in less than a decade we will have no Florida citrus left. That, to me, is unimaginable for a state so identified with oranges and grapefruits.
And last is I think it’s important for us to open up free and fair trade with allies and partners around the world. It has to be on terms that are fair. So I believe in the Trans-Pacific Partnership, but that means that we need to have a deal with Japan that allows us to sell beef and other products into their markets. I think it’s important for these deals. It’s good for us to have millions of people around the world that can afford to buy what we grow, millions of people in the consumer class.
But it has to be on terms that are fair to the American agriculture sector, because I can tell you many of our agricultural products have to compete against other nations that heavily subsidize their industries and have zero environmental or labor regulations over their head compared to ours. And if they can undercut our growers, wipe them out, put them out of business, they then control the global market and can charge us anything they want, and as I said, we lose the growing capacity.
Mr. Adams: See, he can talk ag. There we go. All right. [Applause.]
Secretary of Agriculture Tom Vilsack was a guest on today’s AgriTalk radio program with Mike Adams where the discussion focused, in part, on the Farm Bill, trade issues, and the proposed Dietary Guidelines. An unofficial FarmPolicy.com transcript of the discussion with Sec. Vilsack is available below.
Sec. Vilsack says program signup going well but an extension is still a possibility. Decision would come by end of this week.
Mr. Adams: Welcome back. We’re at USDA, talking now with Secretary of Agriculture Tom Vilsack. We appreciate your time, Mr. Secretary. We know you have a lot going on. We just have a limited amount of time, so we want to touch on as many areas as we can. We have a deadline coming up next Tuesday for signup in the farm bill. We just talked with Deputy Secretary Harden, who said you monitor the signup. Are you happy with the way it’s going?
Sec. Vilsack: I am, Mike. We’ve got 95% of the acres reallocated and yields adjusted for 95% of the farms that we expect to participate in that part of it, and about 85% have already made elections on ARC and PLC, which is a significant increase. We’re seeing day-to-day two or three or four percent increase, so we are very pleased with where we are.
And we want to remind folks that if you don’t sign up before the end of the deadline, then the election will be made for you, you’ll be in the PLC program, but you won’t be entitled to benefits in 2015, so we really encourage people to get this work done. And all you need to do is get on the registry, get your appointment set up, and that qualifies.
Mr. Adams:So you do not anticipate, at this point, the need or even the consideration of an extension of that deadline in any way?
Sec. Vilsack:We’re going to look at this from day to day. I’ve talked to our team about maybe the opportunity for flexibility. But given the pace of what we’re seeing, it may not be necessary.
Mr. Adams:But that’s still a possibility?
Sec. Vilsack:It’s still a possibility.
Mr. Adams: Okay, so we’ll watch that as far as as we get closer to that deadline next Tuesday. When would you make that call if there was an extension?
Sec. Vilsack:Probably the end of this week.
Mr. Adams:And of this week.
Mr. Adams: Okay, all right. While we’re here, let’s also talk about trade, because that’s a very hot issue, the talk of TPA and how that impacts, of course, deals like TPP. Where do you think that stands, and getting that message out about the importance of TPA? Because there still seems to be a reluctance by some to go with that. How important is it?
Sec. Vilsack: Mike, farmers need to get engaged in this conversation. They need to make sure their members of Congress and their senators understand how important this is for them personally and for agriculture generally. Thirty percent of our ag sales trade related, roughly equivalent to our net farm income, so if we don’t have export opportunities, we’re not going to make as much money.
This TPP opportunity is a huge opportunity to expand to an increasing middle class in Asia—five hundred and twenty-five million consumers, middle class consumers today in Asia. In just 15 years it’ll be 3.2 billion. It’s a huge opportunity for us. We anticipate $123 billion impact on our overall economy from TPP. Ag is roughly 9% of exports. You can do the math. So we’re talking about hundreds of millions, if not billions of dollars of opportunity. This is critically important.
Last point. If we don’t do this, China will. I’d rather have us lead the effort on labor, and environment, and enforcement mechanisms, and IP protection, and agriculture than having the Chinese lead that effort.
Mr. Adams: A concern about Japan. Will they come down on their tariffs? Will they play ball with the other partners in this? What are you hearing?
Sec. Vilsack:We’ve had progress with Japan. Still work to do. Our Canadian friends less flexible and less willing to negotiate. Part of it, I think, is that we don’t have TPA in place. Those that we’re negotiating with are assuming that, under the current situation, any trade agreement would be subject to modification or amendment by Congress. That’s 535 people that could weigh in on this. We can’t have that if we want to conclude these negotiations in a timely way. We need to get Trade Promotion Authority done.
Mr. Adams: I want to talk about these proposed dietary guidelines. A lot of concern, especially in the livestock industry, that red meat is going to be phased out of the school lunch programs. You’re going to be very much involved in making these final determinations. You have said it’s about health, it’s about nutrition, not about environment. What can you tell us about how this process is going to play out?
Sec. Vilsack: Well, the first thing is we extended the comment period because we want to make sure people have an opportunity to weigh in on this. And I want to reassure people who are listening to this program and reassure the ag community that I understand what my job is. My job is not what the experts on the panel, Scientific Advisory Panel, had. They had freedom to basically opine about a lot of different things. And some of the things that they brought up are appropriate to have discussions about, perhaps not in the context of dietary guidelines, but in the context of overall where are we headed in agriculture.
My job, based on the statute, based on the law, I took an oath to follow the law, follow the Constitution. That oath basically says even if I want to talk about other things, I have to look at dietary and nutrition. That’s what we ought to be deciding these guidelines on, and that’s what I intend to make sure that I do. Obviously I can’t speak for the full process because Secretary Burwell’s got a very important role to play as well.
Mr. Adams: You’ve come out with the definition “actively engaged” as far as those that can receive farm program benefits. Senator Grassley says it’s a step in the right direction. He would like to see it go farther. Tell us about how you came up with this particular definition and who you see it applying to.
Sec. Vilsack:I think we’ve probably hit it just about right because the folks who wanted more strict restrictions are not happy, the folks who feel maybe we’ve gone a little bit too far are not happy, so I suspect we’ve hit it right. Look, Congress directed us to do this, but also limited us in terms of what we could do. It said you can’t do this relative to family farms, you don’t have to do it relative to corporations, so all that’s left are joint ventures, limited partnerships and general partnerships, roughly 1,500 operations throughout the United States. There we said the default position is one actively engaged manager.
Now if you’ve got a complex or a large operation, you might be able to make the case, if you were to adequately document that case, to have more than one, but you can’t have any more than three. And I think that’s a reflection of the flexibility that we need relative to the nature of agriculture generally, but also tightening up what was a very significant loophole where we had ten, 15, 20 different people saying because I was on a conference call and made a decision to buy this or that, or to plant this or that, I’m somehow actively engaged. We want to get it back to a system that we can defend.
Mr. Adams: We’re almost out of time. Coexistence. Can we achieve that, do you think, in agriculture?
Sec. Vilsack:I think we have to. Now I may be the only person in America that believes that, but look, GMOs are here to stay. We need them if we’re going to feed the world. Organic is a high value proposition. If we want young people to get engaged in this business and be able to do it from scratch, organic is a way to do it without having to buy 1,000 acres and have the capital costs associated with it. So to me coexistence is about making sure that all options are on the table for folks.
Mr. Adams: Very good. So we watch this week for any announcements on the deadline for the signup, but right now you feel pretty good about the way it’s going.
Mr. Adams: Very good. Thank you, Mr. Secretary.
Sec. Vilsack: Thanks, Mike.
Mr. Adams: Secretary of Agriculture Tom Vilsack, as we wrap up our broadcast here at USDA.
Note: Thanks very much to the many readers who have expressed how much they have enjoyed the FarmPolicy newsletter over the years. The numerous Emails and tweets from readers about the newsletter ending next week have been extraordinarily gracious and very much appreciated.
Philip Brasher reported yesterday at Agri-Pulse that, “Republicans and Democrats slammed the Agriculture Department over allegations of abuse at a livestock research facility in Nebraska and accused agency officials of stonewalling lawmakers’ requests for information.
“‘It sounds like it was a house of horrors that was going on there,’ said Rep. Tom Rooney, R-Fla., referring to allegations about the U.S. Meat Animal Research Center contained in a New York Times article published in January.
“Rooney, one of several members of the House Agriculture Appropriations Subcommittee who grilled USDA officials about the issue, said the allegations cast the cattle industry in a bad light. The idea that the research highlighted in the article was undertaken at the industry’s request was ‘bull-you-know-what,’ Rooney said.”
“Lawmakers are pushing for a federal law that would require manufacturers to label all genetically engineered foods and any food products that contain genetically engineered ingredients.
“The Genetically Engineered Food Right-to-Know Act, which Rep. Peter DeFazio (D-Ore.) introduced in the House and Sen. Barbara Boxer (D-Calif.) introduced in the Senate, would direct the Food and Drug Administration to enforce the new rule.”
An update on Friday at the National Sustainable Agriculture Coalition (NSAC) Blog stated that, “This week the House and Senate Budget Committees each passed their Fiscal Year 2016 budget resolutions on party line votes.
“Each Committee’s resolution will now go to the floor of the House and Senate for consideration. This will likely take place next week with final passage targeted for the end of the week.”
The NSAC update explained that, “Budget resolutions provide the blue print 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.
“Budget resolutions may also include ‘budget reconciliation’ instructions, which instruct certain Committees to meet specific deficit-reduction targets through reductions in mandatory spending. Only the House Budget Committee’s version contains reconciliation instructions to the Agriculture Committee.”
“‘Periods of record warmth in the West and not enough precipitation during the rainy season cut short drought relief in California this winter and prospects for above-average temperatures this spring may make the situation worse,’ Jon Gottschalck, chief of the Operational Prediction Branch at the Climate Prediction Center, said in issuing its spring outlook.
“The center, a division of the National Oceanic and Atmospheric Administration, also said rivers in western New York and eastern New England have the greatest risk of spring flooding in part because of heavy snowpack coupled with possible spring rain.”
Janet Hook and Kristina Peterson reported in today’s Wall Street Journal that, “House and Senate Republicans have resurrected efforts to curb spending for Medicare and other safety-net programs, releasing budgets this week that bring government entitlements back to the center of political conversation.
“The Senate GOP budget released Wednesday calls for saving $5.1 trillion over 10 years, including $4.3 trillion by repealing the Affordable Care Act and curbing entitlement programs such as Medicare, Medicaid and food stamps.”
The Journal article noted that, “Each chamber will vote on its own budget, before merging them and voting on a unified budget setting overall spending levels for the fiscal year. The policy proposals described in the budgets aren’t binding and stand little chance of becoming law under Mr. Obama, but they send a message about GOP priorities.”