Yesterday’s Crop Production report from the USDA’s National Agricultural Statistics Service (NASS) noted that, “Corn production is forecast at 14.0 billion bushels, up 1 percent from 2013. Based on conditions as of August 1, yields are expected to average 167.4 bushels per acre, up 8.6 bushels from 2013. If realized, this will be the highest yield and production on record for the United States [related graph].”
The report added that, “Soybean production is forecast at a record 3.82 billion bushels, up 16 percent from last year. Based on August 1 conditions, yields are expected to average a record high 45.4 bushels per acre, up 2.1 bushels from last year. Area for harvest in the United States is forecast at a record 84.1 million acres, unchanged from June but up 11 percent from last year [related graph].”
A summary of key variables for corn from yesterday’s WASDE report is available here, while a soybean summary can be found here.
The WASDE update noted that, “The projected season-average farm price for corn is lowered 10 cents at both ends of the range to $3.55 to $4.25 per bushel…[and]… The U.S. season-average soybean price for 2014/15 is forecast at $9.35 to $11.35 per bushel, down 15 cents on both ends.”
Ed O’Keefe reported in today’s Washington Post that, “House Budget Committee Chairman Paul Ryan (R-Wis.) introduced a budget proposal Tuesday that would cut more than $5 trillion in federal spending over the next decade, primarily by effectively repealing President Obama’s signature health-care law and greatly reducing funding for social programs.”
The Post article noted that, “Congress approved a bipartisan two-year budget agreement late last year, but Ryan said he drafted a separate proposal because the current plan ‘is nowhere near what we need’ to cut spending.”
Mr. O’Keefe added that, “But any fighting between Democrats and Republicans on spending will not result in the deadline-driven fiscal crises of recent years. Although the GOP-controlled House is expected to debate and pass Ryan’s plan, it will serve only as a political show vote because Democrats, who control the Senate, do not plan to propose or vote on a budget plan.”
On Friday, Sec. of Agriculture Tom Vilsack testified before the House Appropriations Subcommittee on Agriculture regarding the fiscal year 2015 budget.
A video replay of the hearing is available here (part one), and here (part two).
Below are some highlights from the Appropriations hearing.
Full Committee Chairman Hal Rogers (R., Ky.) brought attention to the SNAP program (food stamps) and sought more detail about USDA resource use for promoting the program, while Sec. Vilsack described USDA outreach efforts as educational in nature.
Damian Paletta reported in today’s Wall Street Journal that, “The White House offered a tax and spending plan Tuesday that was largely absent of lofty new policy goals, acknowledging the limited ambition of both political parties to renew a fight over the budget with midterm elections looming.
“President Barack Obama’s $3.9 trillion budget for the year beginning Oct. 1 focused on targeted measures, many of which have been previously proposed, including tax increases on upper-income Americans and companies such as oil and gas concerns. It also called for spending increases for education, infrastructure projects, and research and development, and included proposals to aid low-income workers and the unemployed, such as expanding the Earned Income Tax Credit for more childless workers.” (Note that a brief overview of the budget proposal is available here, while remarks by Pres. Obama yesterday announcing the budget outline can be read here).
The Journal article explained that, “The president’s framework is constrained by a two-year deal on discretionary spending struck in December between House Budget Chairman Paul Ryan (R., Wis.) and Senate Budget Chairman Patty Murray (D., Wash.). The agreement came after last year’s government shutdown and a decision by many lawmakers to avoid another fight over the debt ceiling. Lawmakers are instead waiting to see how the congressional elections in November might change the capital’s political dynamic. And with fiscal fatigue setting in, it is possible both sides will forgo writing budgets in Congress this year since the spending levels already have been agreed to.”
Tony C. Dreibus and Neena Rai reported yesterday at The Wall Street Journal Online that, “U.S. wheat futures surged 4.6%, the biggest one-day percentage gain in more than 17 months, as traders fretted that Ukraine’s escalating crisis will slow grain exports from the eastern European country.
“Wheat prices jumped after Russia’s military appeared to tighten its control of Ukraine’s Black Sea region of Crimea. The tensions led traders to speculate that buyers of wheat and corn will shift purchases from Ukraine—one of the world’s biggest grain exporters—to shippers such as the U.S.”
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.”
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].
David Rogers reported yesterday at Politico that, “After a two-year struggle and more perils than ‘Downton Abbey,’ Congress should finally see a new farm bill this week as House-Senate negotiators worked through the weekend in hopes of filing the legislation by Monday night.
“Going into Sunday night, disputes continued over livestock regulations. But afternoon staff briefings were already being held on the proposed agreement, and the hope was to call the conferees together for their signatures on Monday.
“Indeed, the mood was such that no one believed any longer that more time would help; instead, it was judged better to grab the opportunity for House action this week. And if the farm bill is filed Monday night, the leadership is proposing to call it up as early as Wednesday, a fast turnaround for a measure given up as dead by many just months ago.”
Mr. Rogers noted that, “Bipartisan support remains crucial, but Democrats have won significant compromises on food stamp funding and Speaker John Boehner (R-Ohio) is promising a real push to deliver the needed Republican votes.”
David Rogers reported yesterday at Politico that, “Yards from the finish line, farm bill negotiators are struggling with two final issues — dairy and payment limits — each of which takes Congress back full circle to the question asked when the whole debate began two years ago.
“How far should government go to protect farmers from bad times — and, sometimes, themselves?
“In dairy’s case, Speaker John Boehner (R-Ohio) is adamant that he won’t accept the hands-on approach espoused in the Senate bill to manage future milk supplies to protect farmers’ margins. Corporate giants like Kraft Foods and Nestleback the speaker. And this puts House Agriculture Committee Chairman Frank Lucas (R-Okla.) in the hellish position of having to go against the man who’s been his best friend and ally in the whole tortured farm bill debate: Rep. Collin Peterson (D-Minn.).”
The article noted that, “In the case of payment limits, it’s a very different set of players. But the question is again one of balancing government’s role and the risks of modern agriculture.”
The “Washington Insider” section of DTN explained yesterday (link requires subscription) that, “A number of reports have indicated that an agreement among farm bill conferees that would provide a new dairy policy program without supply management means the farm bill is all but completed. However, there remain several loose ends still dangling until Congress reconvenes next week.
“Chief among these are provisions covering crop subsidy caps and country-of-origin labeling (COOL) for meat and meat products. Some Capitol Hill sources predict that the four farm bill principals likely will decide those issues during a meeting among themselves rather than holding a meeting that includes all 41 conferees.
“There are some who are promoting a modified North American label for COOL, without a U.S.-origin label, but some pro-COOL farm group lobbyists are opposed. Others are counseling that USDA take its time regarding the final COOL rule, choosing instead to wait until the World Trade Organization decides a pending case on that rule that has been filed by Canada and Mexico.”
Erik Wasson reported yesterday at The Hill’s on the Money Blog that, “The House could be moving closer to resolving the impasse over dairy that has so far stymied passage of a five-year farm bill.
“House Agriculture Committee Chairman Frank Lucas (R-Okla.) said Wednesday that work is moving forward on a compromise dairy subsidy reform.”
Mr. Wasson explained that, “Lucas said the compromise does not have supply management but instead is seeking another disincentive to stop farmers from overproducing milk in response to the subsidy.
“‘You have to have disincentives to cause the market to make rational decisions. That’s not just dairy policy, that’s everything in life,’ he said. ‘This compromise has to provide a rational market signal without telling you how to turn the valve on your milk tank.’
“‘We’re moving forward until somebody tells us no,’ Lucas added.”
DTN writer Todd Neeley reported yesterday that, “The notion that common Congressional ground already found in the ongoing farm bill saga now could be the sticking point in current negotiations came as a surprise to Sen. Charles Grassley.
“House Ag Committee ranking member Rep. Collin Peterson, D-Minn., told the Red River Farm Network Monday that farm-program payments are the biggest issue remaining in the farm bill conference talks, even though most headlines on the farm bill impasse center on sticking points in the dairy program. Regional differences remain in various provisions including payment limits, adjusted gross income and a tightening of the actively engaged definition for farmers.
“Grassley, a Republican from Iowa, is a long-time proponent of tighter payment provisions. He told reporters Tuesday that opponents lack moral ground considering that they already agreed to cuts to food stamps.”
Brett Neely reported on Friday at Minnesota Public Radio Online that, “While several key [Farm Bill] issues remain unresolved despite more three years of work on the bill, one of the latest roadblocks is a disagreement about how the federal government should provide a safety net to dairy farmers with GOP House Speaker John Boehner publicly challenging policies long pushed by U.S. Rep. Collin Peterson, D-Minn., the top Democrat on the House Agriculture Committee.”
Mr. Neely explained that, “Peterson wants to establish an insurance program to protect farmers from fluctuations in the cost of feed and what he calls a market stabilization program that would encourage farmers to reduce production when prices drop too far.
“‘The only thing we’re saying is that if you’re taking government help and the market gets oversupplied and so it starts costing the government money, that that cost should be put on the dairy farmers, not on the taxpayers,’ Peterson told MPR News.”
David Rogers reported yesterday at Politico that, “House Agriculture Committee Chairman Frank Lucas conceded Thursday that final action on a farm bill conference report is now likely to slip into late January — a major blow to himself and an ominous turn for the bill itself.
“The draft package combines a landmark rewrite of commodity programs together with cuts from food stamps to generate in the range of $25 billion in 10-year savings, according to preliminary estimates. These accomplishments remain a strong argument for saving the bill. but the persistent in-fighting and delays are taking their toll and a worry for supporters.
“‘It needs to be done as soon as possible but the issues are of such magnitude I can’t go until I get the issues addressed,’ Lucas said. The Oklahoma Republican admitted to immense frustration — and some surprise — at the full dimensions of the standoff now between Speaker John Boehner (R-Ohio) and Lucas’s own ranking Democrat, Minnesota Rep. Collin Peterson, over dairy policy.”
Meredith Shiner and Emma Dumain reported yesterday at Roll Call Online that, “The long-delayed farm bill may finally be on a glide path to passage, after months of partisan wrangling raised doubts over whether such a day would ever come.
“House and Senate conferees are tentatively scheduled to meet Thursday to begin the final process of approving a bill that can be voted on by both chambers, senators and aides said. Leadership aides in both chambers indicated that the long-stalled legislation, which faltered in the House last session, could be sent to the president’s desk by the Martin Luther King Jr. Day recess.
“For weeks, Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., and House Agriculture Chairman Frank D. Lucas, R-Okla., have been engaged in one-on-one negotiations trying to bridge the gap between the two sides. They now believe they have made enough progress to bring the remaining issues to conferees for haggling.”