Reuters writer Christine Stebbins reported yesterday that, “U.S. farmers and bankers have almost a year to get ready for major changes in 2015 as crop insurance rather than direct cash payments to producers becomes the centerpiece of farm policy under the five-year farm bill signed by President Barack Obama earlier this month.
“For 2014 plantings, analysts said there will be no major changes to crop insuranceexcept sharply lower grain prices than in 2013, which will lower potential payments and premiums. Then in 2015, farmers will have a new insurance option for supplemental coverage based on local county yields.”
“‘The message is crop insurance does become the foundation of the farm bill and the primary safety net for producers because they have lost all those direct payments,’ [Michael Barrett, senior vice president for crop insurance at Farm Credit Services of America] said.”
David Pierson reported yesterday at the Los Angeles Times Online that, “For decades, China’s rulers deemed grain production a linchpin to its national security. The policy of self-sufficiency was a legacy of its planned economy from the days of Mao when China was increasingly isolated from the outside world.
“But China’s communist founders couldn’t have predicted the nation’s dizzying rise in meat consumption, which has grown nearly ten-fold to 71 million metric tons since 1975.
The article noted: “That’s why China has been increasingly importing grains such as soybeans and corn from the U.S. and Brazil to boost its livestock population. Grain self-sufficiency was becoming like communist dogma in China: more a theory than a practice.
“Then last week, Beijing called it quits by announcing it was scaling back its annual grain production targets to put a greater emphasis on quality rather than quantity.”
Mr. Pierson explained that, “The shift in grain policy was the clearest signal that policymakers had decided meat production was paramount, a pivot that will ripple across the globe and probably intensify China’s quest for foreign sources of meat, grain and dairy.”
Dan Friedman reported earlier this week at the New York Daily News Online that, “Sen. Kirsten Gillibrand and 71 other congressional Democrats are asking the agriculture secretary to delay a new law cutting food stamps for hundreds of thousands of Americans.
“‘Our states need time to adjust their policies to accommodate this drastic cut and roll out the changes seamlessly,’ the lawmakers say in a letter they plan to send Tuesday to Agriculture Secretary Tom Vilsack.
“Gillibrand lined up the lawmakers to sign off on the letter, which asks Vilsack to delay until next fall a provision in the massive farm bill Congress passed this month that cuts $8 billion in food stamp aid.”
“Meeting with farmers and ranchers around Fresno — where electronic signs along highways flash entreatingly to drivers, ‘Serious drought. Help save water’ — Mr. Obama pledged $183 million from existing federal funds for drought relief programs in California. Though the announcement won cautious support in this region, Mr. Obama also pressed ahead with the more difficult task of enlisting rural America in his campaign on climate change by linking it to the drought.
Jesse Newman reported yesterday at The Wall Street Journal Online that, “Prices for agricultural land in some key states in the U.S. Farm Belt last year grew at the slowest pace in four years, according to a quarterly report Thursday from the Federal Reserve Bank of Chicago.
“Values for farmland in the Chicago Fed’s district, which includes all of Iowa and most of Illinois, Indiana, Michigan and Wisconsin, rose 5% in 2013, the report showed, down from growth of 16% in 2012. Last year’s growth was the slowest pace since 2009 and the second slowest in the past decade, the bank said” [related graph].
Jesse Newman and Jacob Bunge reported in today’s Wall Street Journal that, “Broker Pat Karst thought the farm being auctioned late last month would be scooped up. The 98-acre plot was of decent quality, and the volunteer fire station in Arlington, Ind., where his firm was holding the sale, was packed with farmers.
“Instead, the evening ended with the latest in a spate of failed auctions, after the top bidder dropped out far below the asking price. ‘The moral of the story is: unrealistic expectations from sellers and more caution on the side of the buyer,’ said Mr. Karst, who acknowledged he, too, thought the property would fetch a higher price than offered.
“The flop reflects a broader turning point in one of the U.S.’s biggest recent asset booms. From 2009 to mid-2013, average prices for agricultural land in the U.S. rose by half, while in Iowa, Nebraska and some other Midwest farm states, prices more than doubled, according to U.S. Department of Agriculture data from last August. That helped fuel economic prosperity across the Farm Belt while stoking fears about a possible bubble.”
The Journal writers explained that, “Now there is mounting evidence the boom is fizzling out. Farmland prices in Iowa fell 3% over the second half of last year, and those in Nebraska fell 1%, according to estimates from the Farm Credit Services of America, an Omaha, Neb., lender that calculates weighted averages based on land quality. Reports from U.S. Federal Reserve Banks across the Midwest late last year showed prices flattening or slipping from the previous quarter. A monthly survey of Midwestern lenders by Omaha-based Creighton University in January found the outlook for farmland and ranchland prices was the weakest in more than four years.
“Despite the falling property values, agricultural analysts say a repeat of past farm-belt collapses is unlikely. Farmer income is expected to remain strong and debt levels are low, according to USDA figures” [see related graph].
Today’s Wall Street Journal article stated that, “But prices have plunged for corn, a key U.S. crop. After rising to all-time highs in 2012—driven by growing demand and tight supply because of a historic drought—prices for the biggest U.S. crop dropped 40% last year, thanks to a record harvest of 14 billion bushels. The Federal Reserve warned in January that corn prices, then around $4.28 a bushel, won’t cover farmers’ anticipated cost of raising the crop this year. Prices have since climbed to about $4.40 a bushel, compared with about $8.31 in August 2012.
“Soybeans, the nation’s No. 2 crop, have also lost value. Meanwhile, with the Fed scaling back its stimulus efforts, buyers of U.S. farmland face the prospect of higher interest rates after years of cheap borrowing.”
House Agriculture Committee Chairman Frank Lucas (R., Okla.) discussed issues associated with the agricultural economy with Federal Reserve Chairwoman Janet Yellen on Tuesday during a House Financial Services Committee Hearing.
Related Transcript bellow:
LUCAS: Thank you, Mr. Chair. Chair Yellen, it is a pleasure to be with you today to visit (ph) a little bit about the pressing issues out there.
Sitting on the AG committee and working on the 2012, 2013 and ’14 farm bill now signed into law, there are several things we look at in the committee. And some are directly or indirectly related to the activities of the Fed.
For instance — and not so much an AG-related issue — but the observation from some of my constituents that after the financial problems in 2008, the dramatic downturn in the stock market, and now over the course of the last five years, going from losing half its value basically back to where it was, a little bit on the positive side, not just that, but, for instance, in farm land prices we watched over the course of the last five years a rather dramatic appreciation in the value of farm land.
Now some might say that part of the rebound in the stock market reflected the simple fact that the equities should not have collapsed that far in value five years ago, but — and some would also say that a big part of the takeoff in farm land values reflected the renewable fuel standard, a new government mandate consuming 40 percent of the crop, driving a demand in price responses that hadn’t been there before.
An update yesterday from USDA’s Economic Research Service (ERS), “2014 Farm Sector Income Forecast,” stated that, “Net farm income is forecast to be $95.8 billion in 2014, down 26.6 percent from 2013’s forecast of $130.5 billion. The 2014 forecast would be the lowest since 2010, but would remain $8 billion above the previous 10-year average.”
“The value of crop production is expected to decline substantially in 2014, falling back to pre-2011 levels. Commensurate with this drop is an expected decline in both crop cash receipts and the value of crop inventory adjustment,” the ERS update said; adding that, “Large U.S. corn production increases are expected as U.S. farm operations continue bouncing back from the 2012 drought. Both sales receipts and value of inventory change for corn in 2014 are expected to decline significantly, reflecting a large forecast decline in the average price of corn for grain. The world corn market has become much more competitive.”
ERS noted that, “Soybean receipts and value of production are expected to decline significantly, reflecting a large expected decline (19.3 percent) in the annual price” [see related graphs here and here].
USDA’s initial forecast for 2014 net farm income is $34.7 billion lower than current expectations for 2013, but is $8 billion higher than the average of the previous 10 years. Lower crop cash receipts, and, to a lesser degree, a change in the value of crop inventories and reduced government farm payments, drive the expected drop in net farm income. Crop receipts are expected to decrease more than 12 percent in 2014, led by an expected $11-billion decline in corn receipts and a $6-billion decline in soybean receipts. Elimination of direct payments under the Agricultural Act of 2014 and uncertainty about program enrollment during 2014 result in a projected $5.1 billion decline in government payments. On the other hand, total production expenses are forecast to decline $3.9 billion in 2014, which would be only the second decline in the last 10 years. Livestock receipts and value of inventory change also are expected to increase a combined $3.5 billion in 2014, largely due to higher dairy receipts and the potential for expansion of the beef cattle herd for the first time since 2007. This chart is based on the data available in Farm Income and Wealth Statistics, updated February 11, 2014.
A news release yesterday from National Crop Insurance Services indicated that, “On the heels of the 2014 Farm Bill becoming law, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) addressed the crop insurance industry yesterday and noted that crop insurance is now the centerpiece of U.S. farm policy.
“‘Today, crop insurance is the foundation of this Farm Bill and the farm safety net,’ Stabenow, one of the law’s architects, said at the crop insurance industry’s annual convention.”
The update added that, “‘The farmer gets a bill, not a check with crop insurance…and they don’t get help unless they really need it,’ Stabenow said referring to the premiums farmers pay and the indemnities that are only received after losses are verified.
“Stabenow noted that during the debate, farmers stressed their support for crop insurance and asked Congress to strengthen it. And by making crop insurance more readily available to specialty crop growers, she said the policy’s coalition of support has been strengthened.”
The “Washington Insider” section of DTN (link requires subscription) reported on Friday that, “One of the program areas watched carefully in the farm bill debate was cotton, since the United States is still accused of failing to comply with the 2004 World Trade Organization case it lost to Brazil. Advocates argue that the final version of the farm bill changes to U.S. cotton subsidies to insurance and thus should comply. They also argue that since the changes have the stated goal of promoting a negotiated settlement to the longstanding dispute, the proposal should not be considered as illegally protectionist.
“In fact, Brazil is in the driver’s seat in this dispute since it won the earlier WTO case, but it has not yet taken a formal position on the bill. Still, a number of U.S. observers note that that Brazilian officials made plain their opposition to the new bill’s proposals by pointing out objectionable provisions and emphasizing that the farm bill still contains a substantial volume of trade-distorting subsidies for U.S. cotton growers.
“Separately, Brazilian Foreign Minister Luiz Alberto Figueiredo also told U.S. Trade Representative Michael Froman in a Jan. 30 meeting that Brazil was evaluating the bill to see if it protects Brazilian interests. In addition, the minister told the press that his government has not ruled out retaliation as a possibility.”
AP writer Jeff Karoub reported yesterday that, “A group of scientists at Michigan State University huddled around a computer screen earlier this week — not poring over scientific data but watching a webcast of the U.S. Senate.
“Among them was Rufus Isaacs, an entomologist who leads a team of U.S. and Canadian scientists working to enhance bee pollination of crops. Isaacs was anxious to see if the Senate would approve the long-delayed farm bill, and with it continue the $8.6 million federal grant critical to his pollen project’s survival. The Senate passed the legislation and Congress sent it to President Barack Obama, who is expected to sign the bill Friday on Isaacs’ campus in East Lansing.
“‘It was a great relief and celebration in my lab,’ Isaacs said of the rare moment when pollen took a backseat to politics. ‘It’s been a long wait for this.’”
The article noted that, “The nearly $100 billion-a-year federal farm bill, passed after 2 ½ years of legislative wrangling, does two main things: Almost 80 percent of the money goes to food stamps for the needy, and around 15 percent is designated for farm subsidies and crop insurance subsidies. The pledge of hundreds of millions of dollars for agricultural research is a relative drop in the bucket, but it’s pumping money into universities across the country, particularly for advanced agricultural research.
“Obama’s visit to Michigan State is a nod to the primary role a fellow Democrat, Michigan U.S. Sen. Debbie Stabenow, chairwoman of the Senate’s Agriculture Committee, played in authoring the bill and getting it passed.”
AP writer Henry C. Jackson reported yesterday that, “South Dakota’s congressional delegation pressed the U.S. agriculture secretary Wednesday to expedite a provision in the new farm bill that helps ranchers in the Dakotas and Nebraska recover from an October blizzard.
“The nearly $100 billion-a-year federal farm bill, which awaits President Barack Obama’s signature, restarts a livestock disaster program that had expired. Members of the South Dakota delegation were among those urging Agriculture Secretary Tom Vilsack to make sure there are no delays getting the relief money to ranchers.
“Sens. John Thune, R-S.D., Tim Johnson, D-S.D., Sen. Heidi Heitkamp, D-N.D., and other lawmakers signed a letter Wednesday asking Vilsack to move quickly to provide relief to ranchers and farmers who suffered heavy losses. The total amount of the aid was not clear and would depend on total losses for producers.”
The AP article noted that, “‘They’ve waited long enough for much-needed support,’ said Rep. Kristi Noem, R-S.D., who worked on the committee that combined the House and Senate versions of the farm bill.”
Rep. Noem also wrote a letter to Sec. Vilsack yesterday regarding the implementation of livestock related provisions.
David Rogers reported yesterday at Politico that, “The long-tortured farm bill cleared Congress on Tuesday, ending a two year struggle that split the old farm-food coalition as never before and dramatized the growing isolation of agriculture and rural America in an ever more urban House.
“Written off as dead just months ago, the giant five-year measure won final approval from the Senate on a 68-32 roll call and goes next to President Barack Obama for his signature.
“Throughout the whole drama, Obama has remained remarkably detached, an almost bit player. But Agriculture Secretary Tom Vilsack and his deputy Krysta Harden will move to center stage now as they try to put the pieces in place before spring plantings, just weeks away in some regions of the South.”
“The 72-22 vote caps two years of struggle that badly split the old farm and food coalition. The final product represents a landmark rewrite of commodity programs, but even now, all eyes are returning to corn prices and three sets of numbers that will tell a lot about the topsy-turvy world facing the new law before spring plantings.”
Mr. Rogers explained that, “Indeed, never before has there been a farm bill with such a robust crop insurance program combined with a price-sensitive commodity title, all in a period of changing prices.
“The first data dump could come as early as Tuesday morning when the Congressional Budget Office will release its updated budget forecast, which many expect will show an increase in costs under the old policies of the 2008 farm bill.
“The second will follow quickly in early March, when crop insurance premiums will be set for Midwest corn states for the coming 2014 crop year. And third, CBO will come back weeks later with an updated baseline that will project the costs of the new farm bill once it has been signed into law by President Barack Obama.”