FarmPolicy

August 2, 2015

Tuesday Morning Update: Policy- Budget Issues; Regulations; Trade; and, Bird Flu

Policy, Budget Issues

Seung Min Kim and Jake Sherman reported yesterday at Politico that, “As budget season kicks off in earnest this week, defense hawks are clashing with fiscal hard-liners over military spending, Republicans are scaling back their deficit reduction targets, and Democrats are waiting in the wings to hammer GOP lawmakers with politically tough votes on education, infrastructure and health care.

“In the House, Speaker John Boehner of Ohio, Majority Leader Kevin McCarthy of California and Majority Whip Steve Scalise of Louisiana are stuck between the budget-cutting demands of conservatives and the desire of defense hawks to provide the military with more robust funding. In the Senate, Republicans are already getting hit by Democrats after indicating they’ll target Medicaid and food stamps.

The blueprints due out this week in each chamber will provide the first hard evidence of how aggressively the GOP intends to pursue its top stated priority of fiscal discipline. Though the budgets are partisan documents that won’t be signed into law, failing to marshal enough GOP support to pass one would be a debilitating setback for a party trying to prove it can govern after taking full control of Congress.”

The article noted that, “As some details of the Senate budget became clear last week, Democrats began their attack — pointing to savings that Republicans would like to extract from Medicaid and food stamps for the poor.

“‘Balancing the budget on the backs of working families who have borne the brunt of the recession makes no economic sense,’ said Sen. Bob Casey (D-Pa.).

If the two chambers ultimately can’t come together on a budget, Republicans won’t be able to wield a powerful budget maneuver known as reconciliation, which would allow them to enact policy changes with 51 rather than 60 votes.”

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Sunday Night Update: Budget- Policy Issues; Trade, and, the Ag Economy

Budget, Policy Issues

The House Appropriations Subcommittee on Agriculture resumes hearings this week and will garner additional details regarding USDA budget requests from three Agency Under Secretaries.

On Tuesday the Subcommittee will hear from Kevin Concannon, Under Secretary for Food, Nutrition, and Consumer Services, and on Wednesday, Under Secretary for Rural Development Lisa Mensah will testify before the Subcommittee.

Michael T. Scuse, Under Secretary for Farm and Foreign Agriculture Service and Brandon Willis, the Administrator for the Risk Management Agency will be at the Subcommittee on Thursday.

Meanwhile, the Senate Appropriations Ag Subcommittee will hear perspective on USDA’s budget from Secretary of Agriculture Tom Vilsack on Tuesday.

Recall that last month Sec. Vilsack presented testimony at the House Appropriations Ag Subcommittee (February 25) , as well as the House Ag Committee (February 11) and Senate Ag Committee (February 24).

In addition to the USDA budgetary hearings, the full House Ag Committee will hold a hearing Wednesday on the importance of trade to U.S. agriculture, while the House Ag Conservation and Forestry Subcommittee will hold a hearing on Tuesday, “To review the definition of ‘waters of the United States’ proposed rule and its impact on rural America.”

As these hearings regarding the USDA budget and ag policy issues are going on this week, the House and Senate Budget Committees will also be holding important meetings that have potential ramifications for the Farm Bill.

Recall that an update on Thursday at FarmPolicy.com explored recent budget related developments that could potentially have significant implications for the Farm Bill– the update can be viewed here: “Budget Issues Move to the Front Burner- Potential Farm Bill Implications.”

More recently, Jordain Carney reported on Friday at The Hill Online that, “Senate committees are laying the groundwork for the budget next week.

“Sen. Bernie Sanders (I-Vt.) said this week that the Budget Committee will mark up a budget proposal on Wednesday and Thursday. Sanders, the ranking member of the committee, said Democrats will likely offer ‘very strong amendments’ during markups next week.”

And an update on Friday at the National Sustainable Agriculture Coalition (NSAC) Blog (“The Farm Bill Reloaded”) explained that, “The House Budget Committee is expected to markup the fiscal year 2016 budget resolution on Wednesday March 18. The Senate Budget Committee is expected to follow suit the next day. Assuming the measures pass out of committee they will be debated and voted on in the full House and Senate the following week.

“While the chairmen of the two Committees have kept details of their proposed budget bills very close to the vest, it is widely expected that they will include ‘budget reconciliation’ instructions to various committees of Congress, including the Agriculture Committees. Budget reconciliation is a congressional process used primarily as a means of reducing government spending for mandatory programs.

“It is still unclear exactly what the reconciliation instructions to the Senate and House Agriculture Committees will be, but it has become increasingly clear that there will be instructions to the Agriculture Committees.”

The NSAC update added that, “The rumor in D.C. is that the Committees will be instructed to cut $20 billion, over 10 years, from the 2014 Farm Bill. This amount would be eerily similar to the House’s original 2013 proposal for $20 billion in cuts to the food stamps or Supplemental Nutrition Assistance Program (SNAP).

Whatever the dollar figure is, it doesn’t come with any dictates on what programs to cut. It will be up to the two Agriculture Committees to determine what parts of the farm bill to cut.”

Also on Friday, Kimberly Leonard reported at USNews Online that, “The days of mystery meat and soda-dispensing vending machines may be gone, but that doesn’t mean that the new era of school meals and snacks hasn’t come without its own challenges.

Nutrition guidelines for schools, which have gradually gone into effect since Congress passed the Michelle Obama-backed Healthy Hunger-Free Kids Act in 2010, can be logistically and financially difficult for already strapped district budgets.”

The article noted that, “In response, earlier this month 1,000 members of the School Nutrition Association, which represents school cafeteria workers and companies that supply food and equipment to districts, lobbied Congress for more funding and flexibility when it comes to school meals.

Critics have called out the group for attempting to roll back quality nutrition standards, but the members maintain they are asking for a more realistic approach.”

 

Trade

William Mauldin reported on Sunday at The Wall Street Journal Online that, “Sweeping trade deals of the past—with Canada and Mexico in 1993, for instance, or China in 2000presented big upsides and big risks for a broad swath of U.S. companies.

By contrast, the trade bloc President Barack Obama is trying to hammer out with 11 Pacific countries shows how much smaller both the benefits and perils of trade liberalization have become.

“Complicating the pact’s path, meanwhile, are a host of accompanying fights over issues like environmental regulations and drug-pricing rules.”

The Journal article stated that, “Washington already has trade agreements with more than half the countries in the TPP, among them Singapore, Australia, Peru and Chile… Administration officials and business groups are saying the TPP would lower traditional barriers at the border but also open up U.S.-dominated services industries, boost intellectual-property protection for Hollywood movies and Silicon Valley software, and set rules on the international free flow of data, foreign investment and the environment. A successful deal would also lower regular agricultural and food barriers in Japan and other countries, raising profits for American farmers, an increasingly small but influential part of the electorate.”

Christopher Doering reported in Sunday’s Des Moines Register that, “Congress is wrestling with whether to grant President Barack Obama authority to negotiate potentially lucrative trade deals that could be a boon to an Iowa economy already dependent on trade to support thousands of jobs and pump millions of dollars into the state each year.

“Exports provide a major boost to Iowa’s economy, helping a host of industries ranging from agriculture and construction equipment manufacturers to bioscience and aerospace companies.

“The state shipped a record $15.1 billion in goods and services last year — up sharply from $6.4 billion a decade ago, according to the Commerce Department’s International Trade Administration. Trade now supports more than 80,000 jobs in the state.”

The article noted that, “Without trade, [Gov. Terry Branstad] said, the state’s unemployment rate of 4.1 percent in December would likely be higher, while agriculture, manufacturing and other industries in Iowa would be far less profitable.”

Sunday’s article added that, “Agriculture Secretary Tom Vilsack said recently that agricultural exports have been among the biggest beneficiaries of trade, representing 9.2 percent of the record $1.64 trillion in U.S. goods exported in 2014, compared to 6.6 percent in 2000. Overall, exports are equal to about 30 percent of U.S. farm sales.

“‘Without exports, American agriculture would not be a particularly profitable venture,’ he said.”

 

Agricultural Economy

A FarmPolicy.com update on Saturday looked more closely at the persistence of California’s ongoing drought; while an update on Sunday morning at FarmPolicy.com contained recent news items regarding bird flu issues in the U.S.

Keith Good

Bird Flu Issues

Samantha Masunaga reported late last week at the Los Angeles Times Online that, “A ‘limited number’ of turkeys at Butterball contract farms in Missouri and Arkansas have been diagnosed with H5N2 avian influenza, a Butterball spokeswoman said.”

Reuters writer Tom Polansek reported on Saturday that, “The U.S. Department of Agriculture has identified the first infection of a virulent strain of avian flu in poultry in Kansas, confirming the virus has spread into a migratory bird route that runs through the center of the country.

“The discovery of the H5N2 flu strain in a backyard chicken and duck flock in a county just outside Kansas City, Kan., is certain to lead to expanded restrictions on U.S. poultry exports from top trading partners like Mexico and Canada.

“The infection, confirmed on Friday by the U.S. Department of Agriculture, was the first case in an established migratory bird route, known as the central flyway, that stretches roughly north-south from Montana to Texas.”

The article noted that, “Major buyers of U.S. poultry have already restricted imports from other states that have recently been infected with the same flu strain.”

AP writer Steve Karnowski reported on Saturday that, “Animal health experts and poultry growers are scrambling to determine how a dangerous new strain of bird flu infected poultry flocks in four states — and to stop it from spreading.

“Avian influenza is common in wild migratory waterfowl but doesn’t usually harm them. But the H5N2 strain is deadly when it spreads to commercial poultry. It can wipe out a flock of tens of thousands of birds in a few days, as it did at a farm last month in Minnesota, the nation’s top turkey-producing state. The same strain soon turned up on two farms in Missouri and one in Arkansas.

The vast majority of turkeys and chickens in the U.S. spend their lives confined indoors to protect against disease. Yet, as the infections show, viruses can still reach them — tracked in by humans or rodents; carried on trucks, equipment, crates and egg flats; passed from waterfowl to shore birds that find their way into a barn.”

The AP article noted that, “Minnesota confirmed its outbreak March 4, the first H5N2 found in the Mississippi flyway, a major bird migration route. The Missouri and Arkansas cases were confirmed this week. The only known commonality among those states is the flyway. Meanwhile, samples from a Kansas backyard flock of chickens and ducks tested positive for the strain late this week; the affected flock is in a county just west of the Mississippi flyway.

Why it showed up at these locations simultaneously is a mystery, though [Dr. Carol Cardona, an avian influenza specialist at the University of Minnesota] and other experts suspect waterfowl or other wild birds. Meanwhile, officials are keeping an eye on the workers who had contact with the infected flocks, and producers are tightening their standard biosecurity measures, which include putting on sanitary clothing and showering on their way in and out of barns.”

Saturday’s AP article also pointed out that, “Some countries also use those bans to protect their markets from cheaper foreign products, according to Dr. Donna Carver, extension veterinarian at North Carolina State University. ‘There’s not always a scientific reason,’ she said.”

A news release on Friday from the National Chicken Council stated that, “In light of the recent detections of avian influenza (AI) in the United States, the U.S. poultry industry would like to assure the public that detailed response plans are in place for controlling the spread of the virus and for eliminating the virus entirely. The U.S. government and poultry industries have sophisticated systems and techniques to detect the introduction of the virus into a commercial poultry flock and have proven methods to quickly eliminate the virus. The U.S. poultry industry has a strong avian influenza testing and detection program administered by the federal National Poultry Improvement Plan, in addition to each state’s individual response plan. Poultry farmers also maintain strict biosecurity measures year-round, keep their flocks protected from wild birds and routinely test flocks for avian influenza.”

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California Drought- Problems Persist

Discouraging news regarding the ongoing California drought continues to persist.

Jay Famiglietti, a senior water scientist at the NASA Jet Propulsion Laboratory/Caltech, and a professor of Earth system science at UC Irvine, penned a sobering column this week on California water issues in the Los Angeles Times.

Dr. Famiglietti indicated that, “As our ‘wet’ season draws to a close, it is clear that the paltry rain and snowfall have done almost nothing to alleviate epic drought conditions. January was the driest in California since record-keeping began in 1895. Groundwater and snowpack levels are at all-time lows. We’re not just up a creek without a paddle in California, we’re losing the creek too.”

Statewide, we’ve been dropping more than 12 million acre-feet of total water yearly since 2011. Roughly two-thirds of these losses are attributable to groundwater pumping for agricultural irrigation in the Central Valley. Farmers have little choice but to pump more groundwater during droughts, especially when their surface water allocations have been slashed 80% to 100%. But these pumping rates are excessive and unsustainable. Wells are running dry. In some areas of the Central Valley, the land is sinking by one foot or more per year.

As difficult as it may be to face, the simple fact is that California is running out of water — and the problem started before our current drought. NASA data reveal that total water storage in California has been in steady decline since at least 2002, when satellite-based monitoring began, although groundwater depletion has been going on since the early 20th century,” Dr. Famiglietti said.

The LA Times column stated that, “Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.

In short, we have no paddle to navigate this crisis.”

The column went on to outline potential policies that could be implemented to deal with the current situation.

To view a brief Weather Channel video on the California winter snow pack, just click here.

And drought is also having an impact on Washington state.

Maria L. La Ganga reported in Saturday’s Los Angeles Times that, “‘What we’re experiencing is essentially a snowpack drought,’ Maia Bellon, director of the state Department of Ecology, told reporters Friday. ‘As of this very moment, the projected snowpack is 4% of normal in the Olympic Mountains.’

“In the Central Cascades, snowpack is 8% to 45% of normal, and in the Walla Walla area, it’s 67% of normal. The long-range forecast calls for drier, warmer weather, Bellon said, and ‘conditions are expected to get worse.’

“A statewide drought has not been declared in Washington since 2005, but the perilous snow levels mean other parts of the state are being monitored in case the emergency declaration must be broadened.”

The article pointed out that, “To get ready for a long, hot summer, officials have requested $9 million in drought relief funds from the state Legislature and are prepared to make temporary changes to water rights so that crops and fish have an adequate water supply.”

And the National Oceanic and Atmospheric Administration (NOAA) recently indicated that, “The continued availability of irrigation for crops and landscaping is also vulnerable to climate change, particularly in the Southwest where irrigation accounts for the highest volume of water used. Projected increases in temperature and potential evapotranspiration, accompanied by decreases in soil moisture, will challenge this already-dry area with increased demand for water. Demand for water will also grow with population, as people migrate to Sun Belt states for better weather.”

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Friday Morning Update: Budget; Appropriations Hearing; Animal Production Issues; and, Trade

Budget

An update on Thursday evening at FarmPolicy.com explored recent budget related developments that could potentially have significant implications for the Farm Bill– the update can be viewed here: “Budget Issues Move to the Front Burner- Potential Farm Bill Implications.”

 

Appropriations Hearing

On Thursday, the Senate Appropriations Subcommittee on Agriculture heard testimony from FDA Commissioner Dr. Margaret Hamburg.

During the discussion portion of the hearing, a couple of Senators sought more detail and perspective about the FDA’s role as it relates to the recent Dietary Guidelines Advisory Committee Report– additional details on the hearing and the Dietary Guidelines report have been posted here, at FarmPolicy.com.

 

Animal Production Issues

In other news, Lisa Baertlein and P.J. Huffstutter reported yesterday that, “KFC, the world’s largest chain of fried chicken restaurants, may face pressure from consumer and environmental groups to change how its poultry are raised after McDonald’s Corp said it would switch to chicken raised without human antibiotics.

“McDonald’s will phase out chicken raised with antibiotics that are important to human health over two years to allay concern that use of the drugs in meat production has exacerbated the rise of deadly ‘superbugs’ that resist treatment, Reuters reported last week. Within days, retailer Costco Wholesale Corp told Reuters it aims to eliminate the sale of chicken and meat raised with human antibiotics.

KFC is owned by Louisville, Kentucky-based Yum Brands Inc, which has no publicly stated policy on antibiotic use in the production of meat it buys. Chick-fil-A, another chicken restaurant chain that competes with KFC, says about 20 percent of the chicken it serves is raised without any antibiotics, and that its entire supply chain will be converted by 2019.”

Also, a news release this week from Cargill indicated that, “Dr. Stephanie Cottee joins Cargill animal welfare team with global responsibility for poultry.

“She will be based in Guelph, Ontario, Canada and report to Dr. Mike Siemens, PhD, Cargill’s head of animal welfare based in Wichita, Kan. Dr. Cottee’s appointment is effective immediately.”

And Reuters writers Tom Polansek and P.J. Huffstutter reported yesterday that, “A case of bird flu confirmed Wednesday in the heart of America’s poultry region, is certain to mean more export restrictions, increasing U.S. supply and likely forcing the world’s biggest poultry companies to trim prices.”

The article noted that, “The USA Poultry & Egg Export Council said it expects 30 to 40 additional countries to impose new trade restrictions on U.S. poultry and eggs in the $5.7 billion export market. Additional limits could come from Mexico, the top U.S. chicken importer, which already is blocking poultry imports from Minnesota, Missouri and California due to bird flu, the trade group said.

“Previous cases of avian flu in other states triggered China and South Korea to recently impose bans, still in effect, on U.S. poultry imports. Last year, they accounted for about $428.5 million in export sales of poultry meat and products, according to U.S. Department of Agriculture data.

“Other countries have banned exports from only states or counties with positive cases of avian flu.”

See also this update yesterday from Kansas State University Extension, “Poultry bans by overseas buyers could weigh on pork and beef, as well as poultry prices.”

 

Trade

Chris Kirkham reported yesterday at the Los Angeles Times Online that, “The short-term economic impact of the recent labor standoff at West Coast ports will be small, according to a new economic forecast, but the ports face a long-term struggle to remain competitive in the rapidly changing realm of global trade.

Many businesses in California, particularly those tied to agriculture, suffered from missed orders and produce spoiling on docks. But many other shipments were simply delayed rather than lost entirely, according to the quarterly UCLA Anderson Forecast.”

And Ann M. Veneman and Dan Glickman, who respectively served as Agriculture Secretary for George W. Bush and Bill Clinton, indicated in a column this week at The Hill Online that, “As former secretaries of Agriculture, we know firsthand the importance of international trade to America’s farm and ranch families, to our nation’s rural communities, and to the U.S. economy as a whole. There’s no other sector of the U.S. economy where the link between trade and prosperity is clearer than in agriculture.”

The column noted that, “Key to our ability to negotiate and implement market-opening agreements has been enactment of trade negotiating authority. This authority, now called trade promotion authority (TPA), ensures U.S. credibility to conclude the best deal possible at the negotiating table. TPA also ensures common negotiating objectives between the president and Congress, and a continuous consultation process prior to final Congressional approval or disapproval of a trade agreement.

That’s why we, together with all living former secretaries of Agriculture, recently signed an open letter urging Congress to reinstate Trade Promotion Authority to allow the president to effectively negotiate job-supporting trade agreements as other presidents have done.

“With TPA, the United States will be able to pursue trade agreements that support high-paying U.S. jobs while helping America’s farmers and ranchers increase U.S. exports and compete in a highly aggressive globalized economy. TPA will signal to our TPP partners that Congress and the administration stand together on the high standards our negotiators are seeking.”

Keith Good

Thursday Morning Update: Crop Insurance; Policy; Regulations; Ag Economy; and, Biotech

Crop Insurance- GAO Report

On Wednesday, the Government Accountability Office (GAO) released a report on crop insurance titled, “In Areas with Higher Crop Production Risks, Costs Are Greater, and Premiums May Not Cover Expected Losses.”

A summary and highlights of the report have been posted here, at FarmPolicy.com.

Agri-Pulse reporter Philip Brasher, in an article from yesterday, provided a brief and thorough look at the GAO report.

Mr. Brasher reported that, “Farmers in drought-prone areas of the Plains and other high-risk regions often aren’t being charged enough for crop insurance, according to congressional auditors.”

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Highlights: GAO Report on Crop Insurance

On Wednesday, the Government Accountability Office (GAO) released a report on crop insurance titled, “In Areas with Higher Crop Production Risks, Costs Are Greater, and Premiums May Not Cover Expected Losses.”

GAO indicated (full report here) that, “The federal government’s crop insurance costs are substantially higher in areas with higher crop production risks (e.g., drought risk) than in other areas. In the higher risk areas, government costs per dollar of crop value for 2005 through 2013 were over two and a half times the costs in other areas. The figure below shows the costs during this period. However, the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA)—the agency that administers the crop insurance program—does not monitor and report on the government’s crop insurance costs in the higher risk areas.”

The report added that, “RMA implemented changes to premium rates in 2014, decreasing some rates and increasing others, but GAO’s analysis of RMA data shows that, for some crops, RMA’s higher risk premium rates may not cover expected losses. RMA made changes to premium rates from 2013 to 2014, but its plans to phase in changes to premium rates over time could have implications for improving actuarial soundness. USDA is required by statute to limit annual increases in premium rates to 20 percent of what the farmer paid for the same coverage in the previous year. However, GAO found that, for higher risk premium rates that required an increase of at least 20 percent to cover expected losses, RMA did not raise these premium rates as high as the law allows to make the rates more actuarially sound. Without sufficient increases to premium rates, where applicable, RMA may not fully cover expected losses and make the rates more actuarially sound. Furthermore, in analyzing data on premium dollars for 2013, GAO found that had RMA’s higher risk premium rates been more actuarially sound, the federal government could have potentially collected tens of millions of dollars in additional premiums.”

The GAO report noted that, “As shown in table 1, the federal government’s crop insurance costs generally increased for fiscal years 2003 through 2013. A widespread drought and crop losses in crop year 2012 contributed to the spike in government costs to $14.1 billion in fiscal year 2012. In crop year 2013, weather conditions were more favorable, so government costs were lower than in fiscal year 2012. According to an April 2014 CBO estimate, for fiscal years 2014 through 2023, program costs are expected to average $8.9 billion annually.”


(Click here for a larger image of Table 1).

The GAO report also noted that, “Figure 1 shows counties organized in groups of 20 percent based on average county target premium rates, with the darker areas representing counties with higher average county target premium rates. The color-shaded counties represent all 2,554 counties that had county target premium rates for at least one of the five major crops.”


(Click here for a larger image of Figure 1).

In addition, GAO noted that, “Figure 2 shows the riskiest 20 percent of counties (510) in terms of average county target premium rates. These 510 higher risk counties are color-shaded on the basis of their 2013 premium dollars to show which counties purchased the most crop insurance. The Great Plains, which has areas with relatively high drought risk, had a large portion of the higher risk counties’ premium dollars.”


(Click here for a larger image of Figure 2).

And, GAO added that, “Figure 3 compares the estimated government crop insurance costs per dollar of expected crop value for the five major crops in the 510 higher risk counties with the costs in the 2,044 other U.S. counties from 2005 through 2013. Total government crop insurance costs vary from year to year depending on weather-caused crop losses, crop prices, and farmers’ decisions about how much insurance coverage to purchase. To control for variations in crop prices and farmers’ purchase decisions, and to normalize the costs for higher risk counties and lower risk counties while still reflecting weather-caused crop losses, we expressed the estimated government costs in relation to expected crop value. As shown in figure 3, the costs in higher risk counties were substantially greater. Over the 9-year time frame, government costs averaged 14 cents per dollar of expected crop value in the higher risk counties and 5 cents per dollar in the other counties. For example, if two farms each had an expected crop value of $1 million, the higher risk farm would have had an average annual government cost of $140,000, and the lower risk farm would have had an average annual government cost of $50,000. In 2013, the higher risk counties had a government cost of 17 cents per $1 of expected crop value, 3 cents higher than the average during the time frame, and the other counties had a government cost of 5 cents per $1 of expected crop value, the same as the time frame average.”


(Click here for a larger image of Fig 3).

The report stated that, “Premium subsidies provided on behalf of farmers are a large component of government crop insurance costs. Figure 4 compares premium subsidies provided on behalf of farmers per dollar of expected crop value in the 510 higher risk counties with the premium subsidies in the 2,044 other counties from 1994 through 2013. Similar to the pattern shown in figure 3, figure 4 shows that premium subsidies in higher risk counties were substantially more than in the other counties. An important distinction between figure 3 and figure 4 is that figure 3 is indicative of differences in weather-related loss claim payments, which vary from year to year, while the measures of premium subsidies in figure 4 do not vary with weather-related loss claim payments and are related to the program design.”


(Click here for a larger image of Fig 4).

In addiiton, the report explained that, “Figures 5 and 6 show, for 1994 through 2013, respectively, farmers’ net gains per dollar of expected crop value and net gains per dollar of premium paid by farmers. If a farmer’s net gain per dollar of premium paid is more than zero, it means the farmer received more in loss claim payments than he or she paid in premiums. As shown in these two figures, farmers’ net gains fluctuated from year to year…During the 20-year time frame, farmers’ net gains from crop insurance averaged 9 cents per $1 of expected crop value in the higher risk counties and 2 cents per $1 of expected crop value in the lower risk counties. In addition, farmers in higher risk counties averaged $1.97 in net gains per $1 of premiums paid compared with net gains averaging $0.87 per $1 of premiums paid for farmers in the lower risk counties over the 20-year time frame.”


(Click here for a larger image of Fig 5).


(Click here for a larger image of Fig 6).

Bringing these figures together, the GAO report indicated that, “Figures 3, 4, 5, and 6 illustrate the extent to which higher risk areas have higher relative government costs, and farmers in those areas receive higher relative benefits. Furthermore, the difference between higher risk counties and lower risk counties in premium subsidies provided on behalf of farmers per dollar of expected crop value in 2013—11 cents per $1 versus 4 cents per $1, respectively, on average—indicates that the government’s crop insurance costs might be reduced for farmers in higher risk counties without denying them sufficient risk protection. Specifically, if farmers in the other counties have sufficient risk protection while receiving premium subsidies of 4 cents per $1 of expected crop value, farmers in the higher risk counties might have sufficient risk protection with premium subsidies of less than 11 cents per $1 of expected crop value.”

The GAO report included two recommendations:

“GAO recommends that RMA (1) monitor and report on crop insurance costs in areas that have higher crop production risks and (2), as appropriate, increase its adjustments of premium rates in these areas by as much as the full 20 percent annually that is allowed by law.

“RMA disagreed with GAO’s first recommendation and agreed with the second. GAO continues to believe that RMA can and should do more to monitor and report on crop insurance costs in higher risk areas, where government costs were found to be substantially higher.”

Philip Brasher reported on Wednesday at Agri-Pulse that, “Farmers in drought-prone areas of the Plains and other high-risk regions often aren’t being charged enough for crop insurance, according to congressional auditors.”

Mr. Brasher explained that, “From 2005 through 2013, government costs averaged 14 cents per dollar of expected crop value in higher-risk counties versus 5 cents per dollar in lower-risk ones, according to GAO. Those differences mean that for two farms, each with an expected crop value of $1 million, it cost the government on average $140,000 to insure a grower in a higher-risk county versus $50,000 in the lower-risk one.

In 2013, the cost gap between higher risk and lower counties was 17 cents versus 5 cents per dollar of crop value.

“RMA challenged some aspects of GAO’s analysis as well as the recommendations. In a letter published as part of the report, RMA Administrator Brandon Willis said that the agency already provided enough cost information and said that the agency had to be cautious about raising rates.”

The Agri-Pulse article noted that, “The American Association of Crop Insurers, which represents companies that provide the coverage, applauded the GAO for what the group called its ‘constructive approach.’

“‘It is important to recall that program costs and rates aren’t necessarily the same thing. That being said, we do have concerns about the level of rates in parts of the program,’ the group said in a statement.

“‘We know that any increases in program costs will only make the crop insurance program a bigger target for its critics.'”

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Wednesday Morning Update: Policy Issues-Ag Economy; Regulations; and, Trade

Policy Issues, Budget Baselines, USDA Reports

Corey Paul reported on Monday at the The Odessa (Tex.) American Online that, “[House Ag Committee Chairman Mike Conaway (R., Tex.)] said when he was appointed chairman in January that his chief priority was launching a review of the country’s Supplemental Nutritional Assistance Program, or food stamps, criticizing a lack of oversight for the $80 billion annual program.

“Conaway said Monday that review is underway and that he does not want his fellow legislators to make cuts to the program before he is finished.

“‘I’m trying to maintain this idea that we don’t have any preconceived reforms in mind right this second, and we want to let those percolate out of the review itself,’ Conaway said. ‘One of the fights I’m having with the budget is to make sure they don’t do things there that would taint the water.’”

Meanwhile, with respect to the commodity title of the Farm Bill, Reuters news reported yesterday that, “Government support for U.S. grain farmers under the new five-year farm bill will peak with the coming 2015 crop, the Food and Agricultural Policy Research Institute said in a new report.”

The article noted that, “‘Payments under 2014 farm bill programs increase when crop prices fall,’ FAPRI said in its 2015 U.S. Baseline Briefing Book. The think tank estimated that $3.9 billion in ARC and PLC payments for last year’s 2014 crop would be made after fiscal 2016 begins on Oct. 1.

“‘ARC spending is greatest in 2015/16 but declines in later years as the moving averages that determine benchmark revenues adjust,’ FAPRI said. ‘Projected average ARC and PLC payments peak with the 2015 crop at about $6.5 billion but decline to $3.4 billion for the 2018 crop.’”

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Jeb Bush Video: Iowa

Des Moines Register reporter Jason Noble pointed to this recent video from Jeb Bush which highlighted his appearance at the Iowa Ag Summit and agricultural issues.

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Baseline Updates: Corn and Soybean Pricies

University of Illinois agricultural economist John Newton provided a visual look at price projections for corn and soybeans in recently updated baseline analysis from CBO and FAPRI:

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USDA- NASS Crop Condition Updates

On Monday, USDA’s National Agricultural Statistics Service (NASS) office in Texas indicated that, “Producers in South Central, the Upper Coast, and the Southern parts of the state began planting corn. Sorghum planting was active in areas of the Coastal Bend and the Lower Valley. Field preparations for cotton and sorghum continued in areas of the High Plains and Trans-Pecos.”

The report added that, “Livestock began experiencing stress due to wet, cool conditions in areas of East Texas. Supplemental feeding remained active. Range and pasture progressed throughout the state; however, continued cold temperatures began to deteriorate conditions in areas of the Blacklands and the South East.”

The NASS report from Texas noted that 50% of the wheat crop is in good to excellent condition.

The Kansas NASS report stated on Monday that, “Livestock continued to graze crop residue with supplemental feeding reported. Cold temperatures caused livestock producers to increase care. Some producers applied fertilizer for the spring planting season.”

The report added that, “Winter wheat condition rated 3 percent very poor, 10 poor, 41 fair, 43 good, and 3 excellent” and, “Cattle and calf conditions rated 1 percent very poor, 2 poor, 32 fair, 59 good, and 6 excellent.”

And the Oklahoma NASS report noted on Monday that 42% of the winter wheat was in good to excellent condition, and added that, “Conditions of pasture and range were rated mostly fair to good. Livestock conditions were rated mostly good to fair. The snow and freezing temperatures have depleted hay supplies in some areas and stock ponds are getting lower. Many operators were still providing hay and supplemental feed for livestock.”

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Tuesday Morning Update: Baseline Updates- Policy Issues; Animal Research; Trade; Iowa Ag Summit; and, the Ag Economy

Baseline Updates- Policy Issues

On Monday, the Congressional Budget Office (CBO) released its updated baseline Budget Projections for 2015 to 2025.

A brief overview of CBO’s January baseline projections can be found here.

Also on Monday, the Food and Agricultural Policy Research Institute (FAPRI) released its latest baseline-briefing book.

Both baseline updates showed a change in farm program spending projections from previous baseline reports.

Politico writer David Rogers, and Philip Brasher of Agri-Pulse, separately examined the numbers in greater detail on Monday- details of their reporting can be found at this FarmPolicy.com update from yesterday.

More broadly, yesterday’s FAPRI update stated that, “Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.”

Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies,” FAPRI said.

In addition, CBO’s outlook for the SNAP program is available here, while the CBO’s outlook for child nutrition programs can be found here.

Meanwhile, Marcia Zarley Taylor reported yesterday at DTN (link requires subscription) that, “U.S. crop farmers have just weeks left to make their five-year farm program decision. For most, the March 31 choice will be narrowed between ARC-County and Production Loss Coverage (PLC). Many corn-soybean growers in the northern Corn Belt see good reason to go with what they call the ‘surer thing’ of ARC payments, DTN interviews have found.

“Even in counties that experienced bumper yields in 2014, growers may face little or no ARC payments in 2014 but still are banking that ARC will outpay PLC for 2015 and beyond. For example, McLean County, Illinois, averaged an amazing 217 bpa corn yield in 2014, so stands to collect no ARC payments, the University of Illinois estimates. However, with a return to average or below average yields in 2015, ARC-County payments could jump to $78/base acre in 2015.”

(more…)

CBO, FAPRI March Baseline Updates

On Monday, the Congressional Budget Office (CBO) released its updated baseline Budget Projections for 2015 to 2025.

A brief overview of CBO’s January baseline projections can be found here.

Also on Monday, the Food and Agricultural Policy Research Institute (FAPRI) released its latest baseline-briefing book.

David Rogers reported on Monday at Politico that, “Fresh projections for the new farm bill Monday show a greater participation rate — and higher costs — associated with a Senate-backed revenue loss program championed by Midwest corn and soybean producers.

“A revised farm baseline prepared by the Congressional Budget Office shows a decided shift in this direction from just months ago. A second report from the Food and Agricultural Policy Research Institute at the University of Missouri projects that the program’s costs will jump by nearly $1.7 billion, or 81 percent, above what FAPRI had previously predicted for the 2015-2016 marketing year.”

Mr. Rogers explained that, “Proponents of the program, formally known as Agricultural Risk Coverage or ARC, argue that it is still more efficient than traditional counter-cyclical, price support programs. And in fact, both the FAPRI and CBO numbers show that the ARC payments to corn farmers will drop off significantly in three to four years.

“Nonetheless, the infusion of so much government money up front is sure to invite criticism. CBO projects that total payments to corn and soybean producers from ARC alone will be $3.37 billion in fiscal 2017 — when the big subsidies come due for the government.

“That is 38 percent higher than what this sector collected in 2014 under the old system of direct cash payments to producers.”

The Politico article pointed out that, “It’s still a bit of a guessing game as to how many farmers will sign up for ARC vs. PLC, but the combined costs in the early years are striking.

“In the case of corn and soybeans, CBO is projecting most producers will go in the direction of ARC, but thousands will opt for PLC instead, accounting for another $1.47 billion in costs in fiscal 2017.

When added to the ARC subsidies, the corn and beans sector is expected then to receive a total of $4.8 billion in government payments in fiscal 2017. That’s nearly double what the direct payments were for these two crops in 2014.”

And Philip Brasher reported on Monday at Agri-Pulse that, “The new farm programs for grain and oilseed growers will pay them up to $7 billion annually over the next few years, surpassing what they would have received through the old system of direct payments, according to new forecasts released Monday.”

After additional analysis of the updated CBO and FAPRI reports, Mr. Brasher pointed out that, “After 2018, ARC payments decline dramatically as the five-year moving average begins to reflect the drop in commodity prices. FAPRI economists estimate that ARC payments will drop from $3.1 billion in fiscal 2018 to $1.8 billion in 2019 and then to $1.2 billion the following year.

PLC payments, on the other hand are expected to peak at $2.8 billion in fiscal 2018 and drop to $2.4 billion the following year, according to FAPRI.

Both CBO and FAPRI estimate that the cost of the federal crop insurance program, which has been expanded with new products under the 2014 farm bill, including a new policy for cotton, will hover around $8 billion a year.”

More broadly, the FAPRI update stated that, “Lower prices have resulted in a large decline in crop producer income and could result in significant federal spending under new programs established by the 2014 farm bill. After reaching record levels in 2014, most livestock sector prices are also expected to decline in 2015. As a result, net farm income is projected to fall sharply.”

Average projected corn prices recover to $3.89 per bushel for the 2015/16 marketing year in response to reduced U.S. production. Wheat and soybean prices both fall in 2015/16, to $5.17 per bushel and $9.29 per bushel, respectively, given continued large global supplies,” FAPRI said.

In addition, CBO’s outlook for the SNAP program is available here, while the CBO’s outlook for child nutrition programs can be found here.

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Highlights and Summary: Iowa Ag Summit

Donnelle Eller and Jennifer Jacobs reported on the front page of Sunday’s Des Moines Register that, “Nine GOP White House contenders did their best to sound more compelling and better-versed on farm-related matters than their competitors Saturday as they were quizzed during an unusual showcase of agriculture policy on the presidential campaign trail.”

The Register writers explained that, “Unlike the raucous, free-wheeling political rock concert that was the freedom summit, which was hosted by conservative Republican U.S. Rep. Steve King, [moderator and pork and ethanol entrepreneur Bruce Rastetter], a mainstream Republican, kept tighter control on the conversation. He staged a living-room-like setting with leather chairs and a vase of tulips and conducted interview-style question-and-answer sessions on renewable fuels, the wind energy production tax credit, normalizing trade with Cuba, biotechnology, illegal immigration, water pollution from farm runoff and other topics.

“The mood in the crowd of about 900 was warm but mostly subdued as they heard from, in order: New Jersey Gov. Chris Christie, former Arkansas Gov. Mike Huckabee, former Florida Gov. Jeb Bush, former Texas Gov. Rick Perry, U.S. Sen. Ted Cruz of Texas, U.S. Sen. Lindsey Graham of South Carolina, former U.S. Sen. Rick Santorum of Pennsylvania, former New York Gov. George Pataki and Wisconsin Gov. Scott Walker. Despite the free tickets and free lunch, a third of the seats were empty by afternoon.”

Sunday’s article noted that, “The Republicans’ stances differed little except on the Renewable Fuel Standard, a federal mandate that outlines how much ethanol and biodiesel must be blended annually into the country’s fuel supply. Most said they understand and accept the need for the mandate, at least until it can be phased out. Santorum and Huckabee in particular passionately defended it.

But Pataki expressed vocal opposition to the RFS, as did Cruz, whose answers were met with applause.”

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Bloomberg Politics: “With All Due Respect” – Iowa Ag Summit Preview

From Bloomberg Politics today: “Mark Halperin is joined by Iowa Agriculture Summit Organizer Bruce Rastetter and Des Moines Register Chief Political Reporter Jennifer Jacobs on ‘With All Due Respect.'”

A video replay of the entire Bloomberg show is available here, while specific clips are available below.

 

Bruce Rastetter, organizer of the agricultural summit in Des Moines on Saturday, previews what to expect when Jeb Bush and other 2016 Republicans take the stage,” Bloomberg Politics.

 

Mark Halperin and John Heilemann discuss what’s at stake for the GOP hopefuls in Iowa on Saturday,” Bloomberg Politics.

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Prelude to The Iowa Ag Summit- Perspective on Crop Insurance Subsidies Will Likely Be Solicited

Following coverage of the Iowa Ag Summit from earlier this week, Jennifer Jacobs reported on Thursday at The Des Moines Register Online that, “The debut of Jeb Bush [related article] on the Iowa presidential landscape is one factor that marks Saturday’s Iowa Agriculture Summit as an important milestone of the early 2016 campaign.

“It’s also the first big multi-contender GOP presidential forum that will attract business Republicans who are more interested in economic issues than social issues or God’s place in the civic arena.”

Ms. Jacobs went on to discuss “eight things to watch for” at the Summit; the list included the following:

1. Who are the hottest speakers?

2. Who will exhibit the best farm savvy?

3. Will anyone be perceived as anti-ag?

4. How will Christie deal with any awkwardness with the moderator? (“[Host Bruce Rastetter, an agribusiness leader and GOP power player] was one of seven Iowa politicos who flew to New Jersey on a 2012 recruitment mission. He has since backed off support for Christie, saying he’s reserving judgment on the 2016 contenders.”)

5. Will Rubio be a new stand-out? Or someone else?

6. How will Patty Judge be received?

7. Will this event elevate Rastetter’s stature among Republicans?

8. Will GOP contenders who skip the summit be hurt by their absence?And  reported today at Radio Iowa Online that, ” who say they may compete for the Republican Party’s 2016 presidential nomination will be featured at the first-ever Iowa Agricultural Summit tomorrow. The event’s host is of Hubbard, a man who has donated hundreds of thousands of dollars to conservative candidates and causes over the past decade and a half — from the fortune he amassed raising hogs and investing in ethanol production.

And, O. Kay Henderson reported today at Radio Iowa Online that, “Eleven politicians who say they may compete for the Republican Party’s 2016 presidential nomination will be featured at the first-ever Iowa Agricultural Summit tomorrow. The event’s host is Bruce Rastetter of Hubbard, a man who has donated hundreds of thousands of dollars to conservative candidates and causes over the past decade and a half — from the fortune he amassed raising hogs and investing in ethanol production.

“‘Food doesn’t come from a grocery store. You just happen to buy it there,’ Rastetter said during an interview with Radio Iowa, ‘so this is something that affects every American because every American eats and is concerned about food safety, the environment, sustainability — those kinds of things.'”

The article noted that, “‘I hear a number of them are calling around, asking people for their views, their perspective, getting updates on policies and why they exist,’ Rastetter said. ‘So I think that’s all a good thing and we had hoped they would be more up-to-speed with ag policy with just the idea of this summit.’

“Rastetter said the topics for his conversations with the candidates haven’t been kept secret. For example, he plans to ask whether the candidates support federal crop insurance subsidies and pending international trade deals that could boost U.S. ag exports. He will also ask for their views on topics like organic food labeling and immigration policy.”

Today’s update added that, “The event comes at a critical time for agriculture, according to [Iowa GOP Governor Terry Branstad]. He points to falling ag land values, layoffs at John Deere and the USDA’s prediction that net farm income will fall by 32 percent this year. Branstad said the candidates will have an opportunity to ‘articulate a vision’ for bringing ‘prosperity’ to rural America.”

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