FarmPolicy

March 3, 2015

Tuesday Morning Update: Policy Issues; Trade; Ag Economy; Biotech; and Budget

Policy Issues

In a speech yesterday at the 2015 National Anti-Hunger Policy Conference in Washington, D.C., Secretary of Agriculture Tom Vilsack discussed the SNAP program and announced “more than $27 million in grants to fund innovative projects designed help end childhood hunger.”

Also yesterday, at the School Nutrition Association’s 2015 Legislative Action Conference, a separate venue in Washington, D.C., Sen. John Hoeven (R., N.D.) announced “that he plans to introduce the Healthy School Meals Flexibility Act later this week or early next week. The legislation would provide permanent flexibility to school districts in complying with the U.S. Department of Agriculture’s new school nutrition requirements.”

Additional details on these federal nutrition policy issues from yesterday, and on Sec. Vilsack’s remarks regarding the SNAP program, can be found here, at FarmPolicy.com.

On Monday, USDA’s Economic Research Service (ERS) updated its monthly Amber Waves publication; the March edition contained two particularly interesting articles on nutrition related policy. The first looked at the number of school districts serving “local” food, while the second addressed the potential of restricting sweetened beverages purchases through the SNAP program- an especially timely article considering the House Ag Committee’s ongoing top-to-bottom overview of the program (Committee SNAP hearing summaries here and here).

A summary overview of the two ERS articles is available here.

Arthur Delaney reported yesterday at the Huffington Post that, “The Republican Party’s new point man on food stamps, Rep. Mike Conaway (R-Texas), insists that he doesn’t want to cut nutrition assistance benefits. Instead, Conaway is leading a multiyear review of the program, just to make sure it’s the best it can be.

But it might not be up to Conaway. Republicans could push food stamp cuts this year through a parliamentary process known as ‘reconciliation.’

“The GOP has discussed using reconciliation as a way to repeal Obamacare or to do tax reform. Now, some Democrats and food stamp advocates are warning that the Republican-controlled Congress could use the obscure budget maneuver to reduce food stamp assistance.”

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Monday Quick Take: Ag Economy; Trade; Biofuels, and, the Budget

Agricultural Economy

As the ongoing drought in California persists, with resulting adverse water policy determinations for many Golden State farmers, Cindy Change and Matt Hamilton reported in Monday’s Los Angeles Times that, “A winter storm swept through Southern California on Sunday, bringing scattered showers, hail and thunder while higher elevations were expected to see a foot of snow overnight.

“The low-pressure system brought a smattering of storm cells, dumping rain throughout the region from San Luis Obispo to Orange counties.”

Monday’s article noted that, “After a morning lull in precipitation, a second, weaker storm is expected to pass through Monday afternoon. But the rain will not put much of a dent in the state’s lingering drought.

“‘Right now it’s enough to make my cactus smile and to green everything up,’ said Bill Patzert, a climatologist with the Jet Propulsion Laboratory in La Cañada Flintridge. ‘But we would need an inch a day for the next 30 days to make a dent in this drought…. Let’s get right down to it, this is puny.'”

Reuters news reported on Monday that, “Striking truck drivers resumed some roadblocks in Brazil on Monday even as the government cracked down on protesters and promised to implement a law to lower toll costs and give other benefits to the transport sector.

“In the southern state of Rio Grande do Sul, where police had cleared roads by detaining protesters and bringing in back-up troops on Sunday, protesters were stopping trucks at 10 points, the local highway police said. Police were working to clear them, a spokesman said.”

Monday’s article explained that, “The nearly 2-week-old movement has slowed grain deliveries, forced meat-processing plants to close and started to leave some grocery stores with bare shelves.

The country’s No. 2 and 3 soy-exporting ports of Paranagua and Rio Grande have warned that dwindling soy stocks at the ports could affect exports if roadblocks continue.”

Meanwhile, Alexandra Stevenson and Paul Mozur reported in today’s New York Times that, “The smartphone tells the story of a kiwi fruit in China.

With a quick scan of a code, shoppers can look up the fruit’s complete thousand-mile journey from a vine in a lush valley along the upper Yangtze River to a bin in a Beijing supermarket. The smartphone feature, which also details soil and water tests from the farm, is intended to ensure that the kiwi has not been contaminated anywhere along the way.”

Today’s article noted that, “Controlling China’s sprawling food supply chain has proved a frustrating endeavor. Government regulators and state-owned agriculture companies have tried to tackle the problem in a number of ways — increasing factory inspections, conducting mass laboratory tests, enhancing enforcement procedures, even with prosecutions and executions — but food safety scandals still emerge too often.

Chinese technology companies believe they can do it better. From the farm to the table, the country’s biggest players are looking to upgrade archaic systems with robust data collection, smartphone apps, online marketplaces and fancy gadgetry.”

Trade

The New York Times editorial board indicated on Monday that, “The Obama administration and the governments of 11 countries could conclude a sweeping trade agreement known as the Trans-Pacific Partnership in the coming months. Members of Congress should make sure that this and other deals being negotiated are good for America.”

The Times item, added that, “In recent years, trade agreements have become increasingly comprehensive, covering subjects that go far beyond familiar trade issues like tariffs and quotas. The T.P.P. negotiators, for instance, are discussing labor rights, environmental protection, patent and copyright law and how governments treat state-owned businesses. Done right, such deals can raise standards everywhere, protecting workers and opening new markets for American businesses. But there are potential downsides, too, including possible job losses.”

Biofuels

Dan Morgan, a retired reporter and editor with The Washington Post, noted in a column in yesterday’s Des Moines Register that, “Every day nearly a thousand railroad cars roll across the country carrying part of the soaring U.S. energy production that has shaken the global oil cartel and sent gasoline prices plummeting. The cargo is ethanol made from home-grown corn.

“This other American energy boom has been overshadowed by the stunning comeback of the domestic oil industry. President Barack Obama didn’t mention ethanol, biofuels, or agriculture in his State of the Union address, even as he boasted that the country was ‘number one in oil and gas.’ Yet a thriving renewable fuels industry also deserves a share of the credit for the energy renaissance.”

 

Mr. Morgan indicated that, “Based on numbers from the Department of Energy and the oil industry, the amount of ethanol used daily in the United States is now roughly equivalent to the gasoline from 1.2 million barrels of crude oil. That’s about the volume of oil from North Dakota’s Bakken shale, and only slightly less than Qatar’s daily output in 2014.

“Without ethanol, global stocks of oil would have been lower and crude oil prices would have been $10 a barrel higher at the end of 2013, according to a study last year by economist Philip K. Verleger Jr., an energy adviser to Presidents Gerald Ford and Jimmy Carter. Ethanol sold for less than gasoline for all but seven weeks between the start of 2011 and last November, according to data collected by Oil Price Information Service and New York Mercantile Exchange. ‘Blending ethanol with gasoline has been profitable to the refining industry and some of that has been passed on to consumers,’ said Scott Irwin, a University of Illinois agricultural economist.”

Yesterday’s column pointed out that, “Yet ethanol from corn is now out of favor in Washington. In 2011, Congress cancelled a 33-year-old tax credit for blending it with gasoline. For more than a year, the White House has been considering a proposal by the Environmental Protection Agency to scale back requirements for biofuels in gasoline and diesel fuel that were set in 2007 energy legislation. EPA has taken other actions as well that could slow or even end the growth of ethanol, based on the agency’s concern about the fuel market’s ability to absorb larger volumes.

“The just-released White House annual economic report to Congress does cite the growth of ethanol and biofuels along with other energy achievements. But President Obama, once an enthusiast, last mentioned ethanol publicly on Aug. 17, 2011, when he stressed the need to ‘figure out how we can make biofuels out of things that don’t involve our food chain.'”

Concluding, Mr. Morgan noted that, “With grain prices near lows of a few years ago and ethanol production at record levels, corn farmers insist they can grow more crops for energy without hurting consumers or the land. ‘No matter how you slice it, corn produces food and energy more efficiently than anything else,’ said Ron Alverson, a corn farmer and founding chairman of Dakota Ethanol, a 48 million gallon-a-year plant in Wentworth, S.D.

The administration may not see it that way. Even so, the biofuels industry deserves better than to be the orphan of President Obama’s energy policy. In an ‘all of the above’ energy strategy, it seems only fair to give the ‘corn patch’ a place alongside the ‘oil patch.'”

Budget

Mike DeBonis and Paul Kane reported on the front page of Monday’s Washington Post that, “House Republican leaders will face a familiar dilemma this week when they try again to approve funding to keep the Department of Homeland Security functioning through the end of September: They know their party is too divided to resolve the crisis on its own but fear the political fallout if they rely on Democrats to get them out of the jam.”

The Post article noted that, “By late Sunday, [Speaker John] Boehner’s House Republicans had no clear path to a solution other than retreating from their demands that the DHS funding measure include provisions that would block ­implementation of President Obama’s executive actions on immigration.”

Speaker Boehner addressed the DHS funding issue yesterday on “Face the Nation.”

Keith Good

Sunday Afternoon Update: Policy Issues; Trade; Ag Economy; Biotech; and Regulations

Policy Issues

A news release on Friday from USDA’s Farm Service Agency stated that, “Agriculture Secretary Tom Vilsack announced today that a one-time extension will be provided to producers for the new safety-net programs established by the 2014 Farm Bill, known as Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC). The final day to update yield history or reallocate base acres has been extended one additional month, from Feb. 27, 2015 until March 31, 2015. The final day for farm owners and producers to choose ARC or PLC coverage also remains March 31, 2015.”

Also on Friday, Senate Ag Committee Chairman Pat Roberts (R., Kan.) stated that, “‘USDA heard the concerns directly from producers earlier this week at our first Committee hearing and took action as a result,’ Chairman Roberts said. ‘I would encourage all producers to visit their local FSA office as soon as possible to make sure they have enough time and information to make these important decisions.’”

Reuters writer Christine Stebbins reported on Friday that, “Crop insurance price guarantees for U.S. corn, soybeans and spring wheat in 2015 will fall 10 percent or more based on futures settlement prices for February, grain analysts said on Friday.

“The U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA), which oversees the multibillion-dollar crop insurance program, by law uses the average price in February for harvest-time grain futures contracts to set the ‘floor’ price that private insurers must guarantee farmers who sign up…[B]ased on Friday’s futures closes, the RMA is expected to set the floor price for corn at $4.15 a bushel, down 10 percent from last year’s $4.62, and for soybeans at $9.73 a bushel, down 14 percent from last year’s $11.36.”

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Budget Issues Linger– Could Portend Problems with Trade

Categories: Budget /Trade

Siobhan Hughes and Kristina Peterson reported in Saturday’s Wall Street Journal that, “Congress temporarily avoided a partial shutdown of the Homeland Security Department Friday night, approving a one-week extension of the agency’s funding as its midnight deadline approached.

“Support for the one-week patch came together Friday night hours after a three-week short-term spending bill was defeated in the House in a blow to the chamber’s GOP leaders.

“After watching top House Republicans’ plan derail Friday afternoon, House Democrats helped GOP leaders find the votes to pass the one-week funding measure Friday night in a 357-60 vote. House Republican leaders brought the one-week bill to the floor under a fast-track procedure that required a two-thirds majority for passage.”

The Journal writers noted that, “The defection of more than 50 Republicans represented an embarrassment for [House Speaker John Boehner] and was also an early setback in Republican efforts to prove they can effectively govern the GOP-controlled Congress…[T]he struggle to pass even a short-term fix in the House highlighted the tightrope Mr. Boehner must walk, despite controlling the biggest House GOP majority in decades.

“Though Mr. Boehner currently leads a pack of 245 House Republicans, potential defections from either the conservative or centrist wing on tough bills leave him little room to maneuver on votes where Democrats withhold their support.”

Lisa Mascaro and Michael A. Memoli reported in Saturday’s Los Angeles Times that, “The legislative maneuvering left conservatives upset that they had been unable to stop Obama’s immigration plan and more pragmatic Republicans weary of dragging out the fight over Homeland Security funds at continued risk.”

Carl Hulse reported in Saturday’s New York Times that, “The tense meltdown in the House on Friday over funding for the Department of Homeland Security underscores how Congress has lost the ability to perform its most basic functions no matter which party is in charge.”

Mr. Hulse pointed out that, “But the dysfunction also worried lawmakers from both parties who want to make some bipartisan deals on issues like taxes.

“‘My hope is that this does not define the session,’ said Senator Ron Wyden of Oregon, the top Democrat on the Finance Committee. ‘We have to find some common ground.'”

Ashley Parker also writing in Saturday’s New York Times, reported that, “The funding stalemate bodes poorly for any larger policy accomplishments this year, leaving lawmakers pessimistic that the 114th Congress will be able to work in a bipartisan fashion on more complicated issues.

“The Office of Management and Budget has said that a vote to increase the nation’s debt limit will be necessary by mid-to late summer, and lawmakers were also hoping to take up trade policy, as well as at least a modest overhaul of the nation’s tax code — undertakings that now look increasingly imperiled.”

And The Washington Post editorial board opined on Sunday that, “The House has become an embarrassing spectacle, and the promises of Republican leaders in both houses to govern without hop-scotching from crisis to crisis have been shredded. Speaker John A. Boehner’s control of the tea party faction in his GOP caucus is so slight he couldn’t even manage a three-week funding extension for DHS, let alone approving a budget through the end of the fiscal year in September.

Now, instead of tackling major legislation, Congress will be paralyzed for more days — and perhaps even longer — as House Republicans continue to insist on measures to reverse Mr. Obama’s immigration moves that have no chance of passage in the Senate, no chance of being signed by the president and no chance of becoming law.”

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Highlights: House Appropriations Subcommittee on Agriculture- Budget Hearing, NRCS Chief

On Friday, the House Appropriations Subcommittee on Agriculture held a budget hearing and heard testimony from USDA- Natural Resources Conservation Service (NRCS) Chief Jason Weller.

In his opening statement at Friday’s hearing, Subcommittee Chairman Robert Aderholt (R., Ala.) indicated that, “We convene today to review NRCS’s fiscal year 2016 budget request. NRCS requests a total of $1.031 billion in discretionary funding for its salaries, expenses, programs, and activities. In addition, about $3.2 billion will be available through the farm bill’s mandatory conservation programs to farmers, ranchers, and private forest landowners to help them preserve, protect, and enhance their land.”

During the discussion portion of the hearing, Rep. Sanford Bishop (D., Ga.) brought up the issue of NRCS using drones in its remote sensing work- here is the exchange with Chief Well on this issue.

Rep. Sanford Bishop: Can you tell us if you have any plans to utilize drones to assist in the collection of information, because you do a lot of photography, put a lot of contracts out to take pictures, and there’s a tremendous amount of interest in the use of drones in agriculture, particularly in assisting the optimal design and layout of fields for water assessments and other related issues.

“Have you looked at this issue? Are there any current interagency discussions with FAA or other agencies concerning the growth in the use of drones? Obviously there are some security issues involved, but there’s also a great deal of interest for commercializing that practice and using it in agriculture.”

Mr. Jason Weller: “Absolutely. It’s a new technology, but we also have to be careful because folks do have privacy concerns. The FAA also had safety concerns. So in part NRCS, we sort of said full stop, let’s wait for FAA to actually come out with a rule.

Now that the rule has been issued, we’re trying to figure out how the NRCS can work within that to do remote sensing, but in a way that protects privacy, assure landowners who are not there there’s a regulatory component, because I know folks have some concerns when the federal government starts flying drones over their property. So we just need to make sure NRCS is doing this technology in a way that’s appropriate, that’s sensitive to landowners’ concerns, but also then helps us do a better job of managing resources.”

Also at the hearing, Rep. David Young (R., Iowa) wanted more information about NRCS wetland determinations and the farmer’s ability to appeal these decisions.

Rep. David Young: “Last year the NRCS proposed updating the way it conducts wetlands determinations in the prairie pothole states, you know, Minnesota, Iowa, North Dakota, South Dakota. How will the wetland determination proposal affect producers, and when there is a review, will there be an ability for folks to have a second request for review and a second opinion if they disagree with the determination you make?”

Mr. Weller: “Yes. So first starting with what a producer hopefully will experience with us. What we’re proposing is bringing a modern, up-to-date, scientifically driven approach to doing what we’re calling off site determinations. This is a practice we’ve had at NRCS for decades. But what we didn’t have in the prairie pothole region is a consistent approach across all four states. So depending on where your property was, you had a different approach that we needed to update.

“So what this means, though, is actually, at the end of the day, when we implement this—because we were just seeking comments on this approach so far—is better service for a producer. So right now, as you know, there’s been a backlog, particularly in North and South Dakota, but Iowa as well. And in a lot of cases it’s because it’s on site determinations. It takes staff time. When you do an off site determination, you’re using remote sensing technology, you know, photography, LIDAR coverage, other techniques to really do equivalent, if not a more accurate determination approach.

The bottom line is time savings. So the average number of times it takes to do an off site determination is six hours. The average number of hours it takes to do on site is at least 14 hours. Many of them are 40 hours. And that doesn’t count all the driving time. When you break that down in dollars and cents, if you just say, take—you assume 30 bucks an hour for like a field technician to go out and do it, that equates to about 170 bucks to do an off site determination. When you do on site it’s like over $400 a determination, on average.

But when you multiply that over like South Dakota, where they have 2,500 determinations in the backlog, that’s the difference between $300,000 over a million dollars. And when it comes down to that kind of expenditure, when you add that up across four states, you’re talking real money. And that’s money I’d rather employ back in the field to provide, you know, technical assistance to producers as opposed to investing it in a way that we can be more efficient.

“So to your question about what happens for the producer, the first approach would be the off site determinations, which will be much more efficient. They’ll get determinations made quicker. It’s a preliminary determination. If they don’t like the determination, they can then appeal it and they can then request an on site determination.

“If they don’t like the on site determination from the field staff, they can then appeal that to the state office. If they don’t like the state office determination, they can then appeal that to the national appeals division. So there’s absolutely all these protections for a producer. We’re not changing any of that, how that works. We’re actually just trying to streamline it and get the determinations made faster and cheaper.”

And a third key issue discussed at Friday’s Appropriations Committee hearing was on the Regional Conservation Partnership Program.

Chief Weller noted that, “It’s the Regional Conservation Partnership Program, which is a new authority in the 2014 Farm Bill. The basic idea here is you actually invite local partners to devise their own projects. You ask them what do they want to do. So what we’re finding is that more often than not you go into places like the Salinas Valley or the [Pajaro] Valley, in your district, for example, and there’s a lot of people doing a lot of really good things, but more often than not we’re not coordinated. We’re putting a lot of money in the ground, but in a way we’re like ships passing in the night.

“So what we did at the Regional Conservation Partnership Program, it’s sort of like pulling a sock inside out. Instead of the federal government saying this is what we’re going to do in your community, instead we asked the community what do you want to do, and then we’re here to support you. So we opened it up to competition, and we got applications, 600 applications from every state in the country, from all over the country, and folks were really excited about this.

“And what it does is it catalyzes that locally led approach where you get like the Santa Cruz RCD. They then talk to Driscoll’s Berries, they talk to the Pajaro Valley Water Management Agency, they talk to Santa Cruz extension, they talk to the marine sanctuary, and they leverage the resources upfront, and then they come to us and they say NRCS, this is what we would like to do with the EQIP program in the Pajaro Valley to save water, but also to increase ground water recharge.

“And so one of the projects we funded then in the Pajaro Valley this year through our first round was $800,000 of NRCS money matched by $900,000 of the partners, so a total project over one and a half million dollars that they estimate is going to save over 400 acre feet of withdrawal from the aquifer, but also add additional recharge aquifer of 600 acre feet. That is a lot of water savings in a water scarce area.

“But you’re getting industry involved, Driscoll’s Berries; you’re getting extension to provide really good outreach and education; you’re engaging RCD, so it’s a locally led approach; and the federal government then is just a co-investor, we’re a true partner in this. So this is one example. Nationally we have 115 of these projects that they’re just showing this is an approach we really absolutely have to pursue.”

Keith Good

Friday Morning Update: Policy; Trade; Ag Economy; Biofuels; Biotech; and, Budget

Policy Issues

On Thursday, the House Agriculture Nutrition Subcommittee met, “to review SNAP recipient characteristics and dynamics.” Yesterday’s hearing followed Wednesday’s full House Ag Committee meeting on SNAP and nutrition issues.

A FarmPolicy.com summary and overview of Thursday’s Subcommittee hearing is available here.

Over the past two days, the House Ag Committee has been presented with a large amount of detailed analysis and information on SNAP; it appears that Chairman Mike Conaway’s (R., Tex.) top-to-bottom review of the program is off to a substantive and serious start.

In remarks on the House floor Thursday, Ag Nutrition Subcommittee ranking member Jim McGovern (D., Mass.) indicated that, “Mr. Speaker, yesterday the House Agriculture Committee – where I am proud to serve – held the first hearing in its ‘top-to-bottom’ review of the Supplemental Nutrition Assistance Program, or SNAP.

“SNAP is the nation’s pre-eminent anti-hunger program that provides critical food assistance to more than 46 million Americans. Last year, 16 million children – or 1 in 5 American children – relied on SNAP. Unfortunately, every indication is that Republicans will once again try to cut this critical safety-net program.”

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Thursday Morning Update: Policy Issues; Trade; Ag Economy; and, Budget Issues

Policy Issues

On Wednesday, the House Agriculture Committee met to discuss the SNAP program and nutrition issues, a FarmPolicy.com summary and overview of this Committee hearing is available here.

Also on the SNAP issue, a report yesterday by  Mathematica Policy Research presented “estimates that, for each state, measure the need for SNAP and the program’s effectiveness in each of the three years from 2010 to 2012.”

The Mathematica item stated that, “This report presents estimates that, for each state, measure the need for SNAP and the program’s effectiveness in each of the three fiscal years from 2010 to 2012. The estimated numbers of people eligible for SNAP measure the need for the program. The estimated SNAP participation rates measure, state by state, the program’s performance in reaching its target population. In addition to the participation rates that pertain to all eligible people, we derived estimates of participation rates for the ‘working poor,’ that is, people who were eligible for SNAP and lived in households in which someone earned income from a job.”

The report noted that, “Tables III.1  and III.2  present our final shrinkage estimates of SNAP participation rates and the number of people eligible, respectively, in each state for FY 2010 to FY 2012 for all eligible people and for the working poor.”

Recall that he House Agriculture Nutrition Subcommittee will hold a hearing today, “to review SNAP recipient characteristics and dynamics.”

Also on Wednesday, Secretary of Agriculture Tom Vilisack presented testimony at the House Appropriations Subcommittee on Agriculture.

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Wednesday Morning Update: Senate Ag Committee Farm Bill Hearing, Ag Economy; Trade; Budget; and, Biofuels

Policy Issues- Senate Ag Committee Hearing; House Ag Committee Hearing Today

In two separate panels, agricultural producers and Secretary of Agriculture Tom Vilsack testified before the Senate Agriculture Committee on the implementation of  last year’s Farm Bill Tuesday morning.

A FarmPolicy.com summary and overview of the hearing is available here.

AP writer Mary Clare Jalonick reported on Tuesday that, “Congressional Republicans are laying the groundwork for an overhaul of the nation’s food stamp program, trying again after an unsuccessful attempt two years ago.

“House Agriculture Chairman Mike Conaway, R-Texas, said Tuesday that his panel is starting a comprehensive, multiyear review of the program to see what’s working. He said ‘either huge reforms or small reforms’ could come from that, though he wouldn’t detail what those might be.

“Conaway says a 2013 GOP effort to cut food stamps ‘didn’t resonate well’ because Republicans didn’t spell out why it was important. House Republican leaders tried unsuccessfully to cut the program by 5 percent annually by passing a bill with broad new work requirements.”

The AP article noted that, “Some Democrats say they are wary of the review process. Agriculture Committee member James McGovern, a Massachusetts Democrat who is a longtime advocate for food stamps, said he wonders why the SNAP program is singled out for review and not expensive farm programs.

“‘I am deeply concerned about this,’ McGovern said. ‘This is a program that by and large works.’”

Meanwhile, David Pierson reported yesterday at the Los Angeles Times Online that, “An estimated 9 million people are sickened and 1,000 killed by food-borne illnesses in the U.S. each year, but until now officials were unable to pinpoint which foods were most likely to blame.

“In a report released Tuesday, the U.S. Centers for Disease Control and Prevention, the U.S. Food and Drug Administration and the U.S. Department of Food and Agriculture’s Food Safety and Inspection Service detailed the sources of the most common food-borne illnesses with the aim of improving food safety and policy.”

The LA Times article noted that, “Among the findings: More than 80% of E. coli O157 cases were attributed to beef or crops such as leafy vegetables.

“About 75% of campylobacter illnesses were linked to dairy (66%), particularly raw milk dairy, and chicken (8%).

“More than 80% of listeria illnesses were attributed to fruit (50%) and dairy (31%).”

 

Agricultural Economy

Also on Tuesday, USDA’s National Agricultural Statistics Service released its annual U.S. Crop Values Summary, a link to the complete report along with highlights regarding corn and soybeans can also be found at FarmPolicy.com.

Tuesday’s Los Angeles Times contained an article highlighting ongoing drought concerns California. The article included this quote from Bill Patzert, a climatologist with the Jet Propulsion Laboratory: “If you think we’ve turned around on the drought, stop smoking whatever you’re smoking.”

Details on this article, as well as Reuters news updates that focused on agricultural issues in Brazil, Ukraine, and Russia have been posted here.

And Jon Hilsenrath reported on the front page of today’s Wall Street Journal that, “Federal Reserve Chairwoman Janet Yellen, sounding upbeat about the economy, laid the groundwork for interest-rate increases later this year.

“‘The employment situation in the United States has been improving on many dimensions,’ Ms. Yellen told the Senate Banking Committee on Tuesday, her first of two days of semiannual testimony before lawmakers. Spending and production had increased at a ‘solid rate,’ she added, and should remain strong enough to keep bringing unemployment down.”

 

Trade Issues (TPA, TPP); West Coast Ports

And in trade related news, William Mauldin reported in Wednesday’s Wall Street Journal that, “Lawmakers from both parties are trying to strike a difficult balance as they wrangle over the final intricacies of a bill that would expedite consideration of trade deals.

“House and Senate leaders crafting the so-called fast-track bill want to include sweeteners to attract skeptical Democrats, including rules to allow lawmakers greater access to the details of continuing trade negotiations.

“But supporters fear too many provisions friendly to Democrats could alienate Republicans and the business community, or even put a major Pacific trade deal at risk when it comes up for a final vote. The U.S., Japan and 10 other Pacific Rim countries are hoping to agree to the final terms of the trade partnership in coming months.”

Mr. Mauldin explained that, “The bill’s authors—Sen. Orrin Hatch (R., Utah), Sen. Ron Wyden (D., Ore.) and Rep. Paul Ryan (R., Wis.)—are now fighting over how much leverage to give lawmakers to remove any coming trade deals from fast-track protection. That would subject the pacts to ordinary amendments and procedural delays.”

Reuters writer Krista Hughes reported on Tuesday that, “U.S. Federal Reserve Chair Janet Yellen warned Congress on Tuesday against a bid to crack down on currency cheats and said adding currency rules to trade deals could hobble monetary policy.

“Lawmakers have introduced legislation allowing firms to seek compensation for currency weakness overseas and some are also fighting to include a currency chapter in upcoming trade deals such as the 12-nation Trans-Pacific Partnership (TPP).”

Also on Tuesday, Reuters news indicated that, “A meeting aimed at sealing a Pacific trade deal has been called for April, Mexico’s economy minister said on Tuesday, adding he was optimistic it would be sealed in the first half of 2015.

“‘I am very optimistic that there will be good news for the TPP in the first half of this year,’ Ildefonso Guajardo told Reuters, referring to the Trans-Pacific Partnership.”

On the West Coast Port issue, Diana Marcum reported on Tuesday at the Los Angeles Times Online that, “An end to labor strife at West Coast ports should speed up cargo operations, but it may be too late to help California’s drought-weary nut and citrus farmers.

Citrus took the hardest hit. Oranges, many bound for Chinese New Year celebrations, sat decaying on ships, at docks and on the ground as a nine-month labor dispute snarled ports. Fieldworkers, packinghouse employees and truck drivers had their hours cut.”

The article added that, “Losses could reach as high as 50% of citrus exports, or $500 million, according to trade groups… [F]or California’s almond farmers and processors, the severe cargo backlogs have raised fears that foreign buyers could cancel contracts for almonds stuck in storage and buy from other countries.”

 

Budget

David Nakamura and Sean Sullivan reported on the front page of today’s Washington Post that, “The Senate moved closer Tuesday to a deal to avert a partial shutdown of the Department of Homeland Security, but the proposal faced an uncertain future in the House, where Republican leaders conspicuously refused to embrace it.

“Senate Majority Leader Mitch McConnell (R-Ky.) told reporters he was prepared to move swiftly to extend funding for DHS through the fiscal year in a bill that is not contingent on Republican demands to repeal President Obama’s executive actions on immigration.”

 

Biofuels

Bloomberg writer Mario Parker reported on Tuesday that, “Ethanol producers are cutting output after getting squeezed by the biggest drop in gasoline prices since 2008.

“Valero Energy Corp. and Green Plains Renewable Energy Inc., representing about 15 percent of U.S. capacity, have reduced operations as margins narrowed. At a typical mill in Illinois that makes ethanol from corn, profit margins have almost totally disappeared, compared with $1.33 a gallon a year ago, according to AgTrader Talk, a Clive, Iowa-based consulting company.”

Keith Good

Policy Issues; Trade; Ag Economy; and, Budget Issues Tuesday

Policy Issues

In a letter yesterday to Senate and House Budget Committee leaders, a large number of food, agriculture and policy organizations indicated that, “The undersigned 392 organizations, representing America’s agriculture, nutrition, conservation, rural development, finance, forestry, energy, trade, labor, equipment manufactures and crop insurance sectors, strongly urge you to reject calls for additional cuts to programs within the jurisdiction of the Senate and House Agriculture Committees.

Just over one year ago, Congress passed, and the President signed into law, sweeping changes to our nation’s food and farm policy that included significant deficit reduction. The 2014 Farm Bill required over three years of debate in both chambers of Congress and ultimately ended with the consolidation of over 100 programs and cuts to mandatory spending across many titles, including the elimination of the direct payment program. These cuts came in addition to those already in effect due to sequestration.”

After noting that the new measure saved an estimated $23 billion, the letter stated that, “We, therefore, oppose re-opening any title of the Farm Bill during the consideration of the 2016 Budget Resolution and strongly urge you to refrain from including reconciliation instructions for either the Senate Committee on Agriculture, Nutrition, and Forestry or for the House Committee on Agriculture.”

Recall that The House Ag Committee will hold hearings this week on Wednesday and Thursday regarding Farm Bill nutrition issues; while, this morning, the Senate Ag Committee will hold a hearing on Farm Bill implementation and hear testimony from Sec. of Ag. Tom Vilsack.

Sec. Vilsack is also scheduled to appear on Wednesday at the House Appropriations Subcommittee on Agriculture.

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FarmPolicy.com Monday News Update

Recall that earlier this month, USDA updated its U.S. Farm Sector Income Forecast and noted that, “Net farm income is forecast to be $73.6 billion in 2015, down nearly 32 percent from 2014’s forecast of $108 billion. The 2015 forecast would be the lowest since 2009.”

Scott Irwin, an agricultural economist at the University of Illinois at Urbana-Champaign, noted that, “It’s neither happy times nor is the sky falling in terms of agriculture incomes.”

However, Reuters news published a disconcerting article on Monday which stated that, “Across the U.S. Midwest, the plunge in grain prices to near four-year lows is pitting landowners determined to sustain rental incomes against farmer tenants worried about making rent payments because their revenues are squeezed.”

The article noted that, “Some grain farmers already see the burden as too big. They are taking an extreme step, one not widely seen since the 1980s: breaching lease contracts, reducing how much land they will sow this spring and risking years-long legal battles with landlords.”

Meanwhile, a separate Reuters article over the weekend focused on the issue of genetically modified crops in India.

Details on these two Reuters articles can be found at FarmPolicy.com.

The Wall Street Journal reported on Monday that it will “likely take months for the backlog to clear” at West Coast Ports after this weekends resolution of the labor dispute there.  Labor Secretary Tom Perez discussed his role in resolving the dispute Monday morning on MSNBC and CNBC television.

Monday’s papers also included a look at the ongoing budget showdown regarding the Department of Homeland Security. The impetus for the dispute stemmed from executive branch action on immigration policy.  Meanwhile, a subsequent federal court ruling temporarily stopping executive branch implementation of the that policy has added to the complexity of how to resolve the dispute.

An article on the front page of Monday’s Wall Street Journal noted that, “Senate Republicans, still mulling their options, are most likely to end up supporting a short-term extension of the agency’s current funding.” Also, Nathan Koppel reported today at The Wall Street Journal Online that, “The Obama administration on Monday asked a federal court to allow it to continue implementing the president’s immigration plan, which was temporarily blocked last week by a Texas judge.”

News with potentially negative implications for the Trans-Pacific Partnership trade negotiations and Japan unfolded on Monday.

Robin Harding reported today at The Financial Times Online that, “Shinzo Abe, the Japanese prime minister, has lost an important ally on the Trans-Pacific Partnership trade deal after his agriculture minster resigned in a scandal over political donations.”

The FT article added that, “The resignation matters because Mr Nishikawa is a longstanding member of the LDP’s ‘agricultural tribe’. He acted as a firewall for Mr Abe against internal party critics on trade deals and farm reform.

“Negotiators are near a deal on the huge TPP agreement, and agricultural reform is one of Mr Abe’s top priorities this year, so the loss of Mr Nishikawa is a blow to the prime minister’s agenda.”

Also today at FarmPolicy.com is a summary of a recent USDA- Economic Research Service report highlighting agricultural trade issues with China, as well as a look at an ERS publication on wetlands and the Farm Bill.

Keith Good

Monday Morning Highlights: West Coast Ports, Budget, and, the Ag Economy

West Coast Ports

Laura Stevens reported in today’s Wall Street Journal that, “West Coast ports are finally working at full speed again—for the most part— but it will likely take months for the backlog to clear, port officials and logistics experts said.”

The Journal article added that, “Port and logistics experts estimated it could take anywhere from about two to six months to get the U.S. supply chain—which makes sure T-shirts end up on shelves and auto parts are available for manufacturing—back on track.

“Port problems have been causing widespread pain for shippers, retailers, meat and poultry companies and manufacturers across the country. Farmers couldn’t get produce to Asia, leaving some fruit rotting in containers, and some auto manufacturers were forced to fly in parts to keep plants running.”

Today’s article noted that, “Farmers producing crops including oranges, potatoes, Christmas trees and soybeans have all been hard hit, as cargo arrived spoiled in Asia or couldn’t get there at all, said Peter Friedmann, executive director of the Agriculture Transportation Coalition. U.S. farmers are already competing with similar crops being grown around the world as the dollar strengthens, and the slowdown has been a tough blow, he said.

Farmers may have a hard time winning back customers lost over the past couple months, he said, adding, ‘People who are sourcing these products can’t afford a lack of dependability.'”

Sec. of Labor Tom Perez discussed his role in the port dispute resolution on MSNBC and CNBC on Monday morning.

Budget

Michael A. Memoli reported in today’s Los Angeles Times that, “Republicans were hammered over the 1995-96 government shutdowns, losing House seats in the next election and boosting President Clinton’s sagging approval ratings.

“They shot themselves in the foot again with the 16-day government shutdown in 2013 over Obamacare, although their record-low public approval ratings rallied in time to dominate the 2014 midterm election.

Now it appears the party is heading toward another budget-related standoff, this time over immigration policy and the Homeland Security Department, which is scheduled to run out of funding Saturday.”

The article noted that, “But buoyed by a Texas federal judge’s order last week to temporarily halt the president’s immigration plan, other Republicans are betting heavily that this time things will end differently for the party.

“They predict Democrats will shoulder the blame if the Homeland Security Department runs out of money and see no reason to drop their demand that renewed funding include amendments blocking President Obama from implementing his program to defer deportation for millions of immigrants in the country illegally.”

Kristina Peterson reported on the front page of today’s Wall Street Journal that, “In one of the first signs of movement, Senate Republicans, still mulling their options, are most likely to end up supporting a short-term extension of the agency’s current funding, potentially for one or two months, according to GOP aides. But that would meet some conservative opposition in the chamber, and a short term deal also could face hurdles passing the House, where many Republicans are demanding legislative steps to block the president’s immigration policy.”

Today’s article added that, “Many Senate Republicans would like to avoid a lapse in national-security funding at a time of high-profile global threats from Islamic State militants, cybersecurity concerns and other unrest. Homeland Security Secretary Jeh Johnson, speaking on Sunday morning news shows, raised concerns about the funding impasse coming amid fresh terrorism threats, such as a video from Somali terrorist group al-Shabaab purportedly calling for an attack on the Mall of America in Minnesota.

“If funding were to lapse, though, Mr. Johnson said most of the agency’s 240,000 employees, including airport-screening and border-control agents, would still have to work because they are considered essential. He said 30,000 employees would be furloughed, and he said none of the employees would be paid until an agreement was reached.”

Agricultural Economy

Christian Berthelsen reported in today’s Wall Street Journal that, “The rebound in the cotton market is showing signs of wear.

Cotton prices have gained 13% since touching a 5½-year low of 57.30 cents a pound in late January as the U.S. had been selling more of the fiber overseas. But prices faltered Friday after weekly government data showed a large number of orders for U.S.-grown cotton were canceled.

“The news came one day after federal forecasters said growers would likely plant more acres with cotton this spring than an industry group had previously projected.”

And Mitsuru Obe reported today at The Wall Street Journal Online that, “Japanese agriculture minister Koya Nishikawa abruptly resigned over a fundraising scandal Monday, depriving Prime Minister Shinzo Abe of his point person on widely anticipated agriculture reforms only months after he was chosen for the job.

“Mr. Nishikawa’s resignation comes as Mr. Abe’s Liberal Democratic Party is expected to submit legislation to parliament next month that would drastically scale back the political power of small farming co-operatives, helping pave the way to the sector’s overhaul.”

Robin Harding reported today at The Financial Times Online that, “Shinzo Abe, the Japanese prime minister, has lost an important ally on the Trans-Pacific Partnership trade deal after his agriculture minster resigned in a scandal over political donations.”

The FT article added that, “The resignation matters because Mr Nishikawa is a longstanding member of the LDP’s ‘agricultural tribe’. He acted as a firewall for Mr Abe against internal party critics on trade deals and farm reform.

“Negotiators are near a deal on the huge TPP agreement, and agricultural reform is one of Mr Abe’s top priorities this year, so the loss of Mr Nishikawa is a blow to the prime minister’s agenda.”

-kg

Monday Morning Quick Take: Trade Issues, Budget

Categories: Budget /Trade

Trade Issues

Reuters writer Noel Randewich reported on Sunday that, “Growing numbers of freighters were backed up around the two busiest U.S. cargo hubs on Sunday because of a dispute between shipping companies and dockworkers that has led to a partial shutdown of ports along the West Coast.”

The article noted that, “By Sunday morning, 34 container ships, tankers and other cargo vessels were waiting to dock at the ports of Los Angeles and Long Beach, California, up from 32 on Saturday, said Lee Peterson, a spokesman for the port of Long Beach.”

After noting that Labor Secretary Tom Perez had been dispatched by the White House to California to meet with parties to the dispute, the Reuters article stated that, “The Department of Labor is working on Perez’s schedule, spokeswoman Xochitl Hinojosa said on Sunday.

“‘The secretary will meet with the parties to urge them to resolve their dispute quickly at the bargaining table,’ she said.”

In other trade related news, Jonathan Weisman reported in today’s New York Times that, “A number of countries — China most prominent among them — have long acted to hold down the value of their currencies against the dollar, helping their industries by keeping exports to American consumers cheaper and making goods from the United States more expensive.

“And while every president from Bill Clinton on has repeatedly criticized the practice, none have ever taken formal action against China or any other nation to try to stop it.

Now, a growing bipartisan majority in Congress is coalescing around a demand that could derail President Obama’s ambitious trade agenda before it really gets moving: include a robust attack on international currency manipulation or no deal.”

The article, which appeared in the Business Section of Monday’s paper, explained that, “The push for strong currency provisions — in legislation to grant the president ‘fast track’ trade negotiating authority, in a major trade deal with a dozen Pacific Rim countries, or in both — has presented the White House with what it fears is something of a Catch-22.

If members of Congress are to be believed, unless the president’s trade negotiator includes strict, enforceable prohibitions on policies to intentionally hold down the value of currencies, any completed trade accord will die on Capitol Hill. But, administration officials say, demanding the inclusion of such prohibitions would kill the trade deals before they were completed.”

Mr. Weisman noted that, “The administration has a crucial ally in Representative Paul D. Ryan of Wisconsin, the Republican chairman of the House Ways and Means Committee. The trade promotion authority bill he plans to push through his committee by March will include new reporting, monitoring and transparency rules to spotlight currency manipulation, but it will avoid retaliatory enforcement rules that he fears could prompt a trade war.”

And the Times article concluded by pointing out that: [Sen. Chuck Schumer (D., N.Y.) said he had advised the White House to embrace currency protection legislation now, either as part of the bill granting Mr. Obama trade promotion authority or as a stand-alone bill that would move with the Trans-Pacific Partnership. That way, the currency issue would subside before the partnership comes before Congress.

Mr. Schumer said Congress did not ‘have the votes’ for a plain Trans-Pacific Partnership or for granting trade promotion authority.

They actually might need it to happen,’ he said.”

 

Budget Issues

Jeremy W. Peters reported in Monday’s New York Times that, “The House speaker, John A. Boehner, said Sunday that he was ‘certainly’ prepared to allow funding for the Department of Homeland Security to lapse, raising the possibility that one of the government’s largest and most vital agencies could be shut down at the end of the month.”

Mr. Peters noted that, “In dispute is how to handle the issue of immigration. Last month, House Republicans passed a spending plan for the 240,000-employee department that included provisions to gut President Obama’s immigration policy. The bill would revoke legal protections for millions of unauthorized immigrants, including children, and put them at risk of deportation.

“The House measure stands no chance of becoming law…[L]awmakers are gone from Washington until next week, meaning that they have just four days in the Capitol in which to reach a deal before the department’s funding runs out on Feb. 27.”

Keith Good

FarmPolicy.com Recap: Policy Issues; Trade; Agricultural Economy; and, Biotech

Policy Issues

On Friday, the House Appropriations Subcommittee on Agriculture held a budget hearing and heard testimony from USDA Inspector General Phyllis Fong.

During the hearing, Subcommittee Chairman Robert Aderholt (R., Ala.), Subcommittee ranking member Sam Farr (D., Calif.) and Rep. Chellie Pingree (D., Maine) all referenced a recent New York Times article that focused on animal production research procedures and operations at a federal facility in Nebraska. The lawmakers expressed support for the IG to investigate some of the issues raised in the Times article in more detail.

Rep. Sanford Bishop (D., Ga.) raised the issue of fraud and error payments in the SNAP, WIC and farm programs, and Rep. David Young (R., Iowa) brought up antibiotic issues and livestock production during his conversation with IG Fong.

Complete FarmPolicy.com highlights from Friday’s hearing have been posted here.

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Highlights: House Appropriations Subcommittee on Agriculture- Budget Hearing, USDA Inspector General

Categories: Budget /Farm Bill

On Friday, the House Appropriations Subcommittee on Agriculture held a budget hearing and heard testimony from USDA Inspector General Phyllis Fong.

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Photo by the House Appropriations Committee

During the hearing, Subcommittee Chairman Robert Aderholt (R., Ala.), Subcommittee ranking member Sam Farr (D., Calif.) and Rep. Chellie Pingree (D., Maine) all referenced a recent New York Times article that focused on animal production research procedures and operations at a federal facility in Nebraska. The lawmakers expressed support for the IG to investigate some of the issues raised in the Times article in more detail.

Chairman Aderholt: In closing, I do want to thank you for agreeing to review the New York Times allegation about the U.S. Meat Animal Research Center in Clay Center, Nebraska. The article described research and attitudes that seem to be pretty much in…pretty inconsistent with the conscientious, the hardworking scientists and the staff that work there and that we have at the Agricultural Research Service. Your assistance in auditing the claims included in the article and reviewing the current conditions, practices and policies would be very helpful to us.

Ranking Member Farr: And I want to echo what the chairman said on the animal treatment center, and I’m sure it’s going to open up a lot of issues with a lot of university research areas, but it’s worth looking into. I know California has required all the research institutions in the state universities to change all their caging and animal husbandry practices to bring in humane practices, state-of-the-art humane practices. It’s very expensive to bring it all up, but they did it, and I think that’s probably something that we in Congress ought to look at.

Rep. Pingree: I want to just add my voice to the choruses of concern around a very troubling New York Times story that was mentioned about animal research, so I’m hopeful that we’re going to do some more investigating into that. And obviously many of the concerns that were raised in that story about the spending of taxpayer dollars and humane treatment basically bordering on the bizarre, in fact in some of the things that were being researched, in my opinion, and even more importantly, completely counter to what the consumer is looking for today. I mean, the market is growing in humanely raised and, you know, different levels of treatment for animals, so why the taxpayer dollars is being spent in something that’s clearly inappropriate practice I think raises a lot of questions. So just want to add my concerns along with the chair and the ranking member.

Also at the hearing on Friday, Rep. Sanford Bishop (D., Ga.) raised the issue of payment error rates with IG Fong and some of her staff; a portion of this discussion is detailed below.

Rep. Bishop: Can you tell us what the current level of OIG resources are that are dedicated to the FSA and what’s planned for 2016, if any investigations of fraud-related activity have been conducted with respect to FSA programs over the past couple of years?

I’m a very strong supporter of our FSA programs, as I am for SNAP and WIC, but I think all of us agree that fraud should be routed out no matter where it is, and I believe that we need to be concerned with the level of attention which has been reaped on SNAP versus the other programs such as risk management, the conservation programs.

So I’d really like to…can you tell me what the fraud rate, the error rate is? I know that SNAP and WIC are large programs, but what is the percentage error rate there compared to the other programs?

Ms. Fong: Okay.

Rep. Bishop: Because I think I was under the understanding that really that percentage of the total claims was small compared to some of the other programs that don’t get as much attention.

Ms. Fong: Let me just offer a few comments and then I’ll ask Gil and Ann. We also share your view that we need to address fraud wherever it occurs in USDA’s portfolio, and we are paying attention to allegations and issues in the farm programs and crop insurance programs, and I know we have some good examples of that.

In terms of the improper payment rates, you do have—I think you’re correct that in terms of what the department reports as improper payment rates in the food stamp program, it tends to be in the 3-4% range. In some of the other programs, say the RMA and NRCS programs, the improper payment rate is much higher, in the teens, maybe near 20%. There are probably a number of reasons for that. We are paying very close attention to that. And let me just offer the chance to comment to Gil and Ann.

Gil Harden, Assistant Inspector General for Audits: The thing that I would add to that, too, I mean, we are mindful of it, but the FSA percentages for their high risk programs for FSA are lower, some of the lower percentages. But we do keep them on the radar screen.

Ann Coffey, Acting Assistant Inspector General, Investigations: And I’d like to just address the question you had raised about what sorts of resources we’re allocating towards FSA investigative work. Historically, we have focused quite a bit of our resources on the SNAP program, but FSA is an area that we are definitely looking for an increase and expecting to increase our investigative work in those areas. We have had some very good cases within the last recent year with high dollar amounts, and so we do anticipate that within FY16 we will be increasing our work in FSA.

Meanwhile, Rep. David Young (R., Iowa) brought up antibiotic issues and livestock production during his conversation with IG Fong. A replay and transcript of this exchange is included below.

Rep. Young: Thank you for coming today. You know, I was at the beef expo in Iowa over the weekend, and we eat a lot of pork and produce a lot of pork as well in Iowa, as you know. And I understand in your budget you’ve ask for $57 million for an antibiotic resistance study on livestock, and it’s a new USDA initiative, [something] maybe you’ve studied a little bit in the past, but you’ve got to go forward, I think, and do something broader. And this causes farmers and ranchers in my state and other states, probably, some uncertainty and some cause for pause right there.

And just want to make sure that…the concerns are that sometimes this is viewed by ranchers and producers in a political science context and not sound science, and there may be outside pressures. I reflect back to the GMO debate. I just want to know, can you provide an overview of your work so far on any of this and where you want to go on this? And also, how do you involve the agriculture community, from the producers, the farmers, to veterinarians, and will you be keeping us up-to-date on this, and how will you do that?

Ms. Fong: I believe we have an ongoing audit on that. We started it last summer. We are probably in the middle of field work at this point. And I’m going to ask Gil to comment on specifically what our scope is on that.

Mr. Harden: I can kind of speak to our [unintelligible] scope. We’re basically looking at how the department is going about, you know, responding to the antibiotic resistance, you know, how they’re going about surveillance, you know, what they’re doing to match it with the science and stuff. It’s that line of questioning. But we are in the middle of field work. And I’d be more than happy to brief you further once we’re further along in the process.

Rep. Young: I’d appreciate that. Thank you.

-kg

Policy Issues; Ag Economy; Biotech; Trade; and, CFTC

Policy Issues

A news release yesterday from the House Ag Committee stated that, “Today the House Committee on Agriculture sent its Budgets Views and Estimates Letter for Fiscal Year 2016 to the House Budget Committee. In the letter, Committee members urged Budget Committee Chairman Tom Price to take into account that with the Farm Bill the Agriculture Committee made a significant contribution to deficit reduction with the passage of the Farm Bill, which Congressional Budget Office (CBO) estimated at the time would save $16 billion over 10 years. Despite a steep decline in commodity prices the CBO estimates that taxpayer savings remain intact.

“‘The Farm Bill is working as it was intended to work, meeting our objectives with substantially fewer resources,’ Committee members wrote in the letter. ‘From our perspective, we believe that the Committee on Agriculture has done its duty for now with respect to deficit reduction and that areas constituting the other 98 percent of the Federal budget ought to be looked to first for any additional savings being sought this Congress.’”

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Agricultural Economy- Budget Issues; Trade; Biotech; and, Biofuels

Agricultural Economy- Budget Issues

A paper released yesterday by the Federal Reserve Bank of Chicago (“Farm Income’s Impact on the Midwest Economy,” by David Oppedahl) indicated that, “During the first four years following the Great Recession (which ended in mid- 2009), farmers and ranchers generated the highest levels of real agricultural income since 1973 (see figure 1), which contrasted sharply with the uneven fortunes of the broader economy over this span. Yet, since mid-2013, the incomes of crop producers have decreased, while those of livestock producers have increased, as crop (and feed) prices have fallen dramatically, mostly as a result of record or near-record harvests. Hence, risk management remains as critical as ever, as crop producers contend with a downturn in farm income following several years of prosperity. Experts from academia, policy institutions, banking, and the farming industry gathered at the 2014 conference to examine these and other farm income trends, plus their interplay with the regional economy.”

Yesterday’s paper added that, “Government payments (both direct subsidies and crop insurance indemnities) have remained an important part of the farm sector’s income, even as market-derived farm income has risen in recent years. The number of acres covered by crop insurance has grown significantly, and so have the liabilities of the crop insurance program, which is subsidized and overseen by the USDA. The substantial payouts during recent droughts (especially the one in 2012) underscore the importance and value of crop insurance. Agricultural producers are paying premiums for coverage that has generally increased over time. The total value of crop insurance premiums has tended to exceed the total value of indemnities since the mid-2000s, with 2012 being an exception. Much of the farm safety net is legislated through the Agricultural Act of 2014, [Joe Glauber] said. Although nutrition programs have been allocated 80% of this farm bill’s $489 billion in funding, farm commodity, crop insurance, and conservation programs were projected to receive 5%, 8%, and 6% of the funding, respectively, over the 2014–18 period. These programs offer an array of choices for managing various risks faced by agricultural producers (including those related to adverse weather conditions and sudden drops in prices for their goods below certain predetermined levels). The current farm bill’s approach relies upon insurance as the primary means by which to protect against agricultural risks and to support farm incomes.”

With this background in mind, Chris Clayton and Todd Neeley reported yesterday at DTN that, “The White House budget proposal for 2016 seeks to cut crop insurance under the argument that such cuts are needed to offset higher projected direct farm-program subsidies.”

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