David Pierson reported yesterday at the Los Angeles Times Online that, “For decades, China’s rulers deemed grain production a linchpin to its national security. The policy of self-sufficiency was a legacy of its planned economy from the days of Mao when China was increasingly isolated from the outside world.
“But China’s communist founders couldn’t have predicted the nation’s dizzying rise in meat consumption, which has grown nearly ten-fold to 71 million metric tons since 1975.
The article noted: “That’s why China has been increasingly importing grains such as soybeans and corn from the U.S. and Brazil to boost its livestock population. Grain self-sufficiency was becoming like communist dogma in China: more a theory than a practice.
“Then last week, Beijing called it quits by announcing it was scaling back its annual grain production targets to put a greater emphasis on quality rather than quantity.”
Mr. Pierson explained that, “The shift in grain policy was the clearest signal that policymakers had decided meat production was paramount, a pivot that will ripple across the globe and probably intensify China’s quest for foreign sources of meat, grain and dairy.”
A news release yesterday from USDA’s Farm Service Agency (FSA) indicated that, “[USDA- FSA] Administrator Juan Garcia today announced that beginning Feb. 5, USDA will issue payments to dairy farmers enrolled in the Milk Income Loss Contract (MILC) program for the September 2012 marketings. The American Taxpayer Relief Act of 2012 extended the authorization of the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill) through 2013 for many programs administered by FSA, including MILC. The 2008 Farm Bill extension provides for a continuation of the MILC program through Sept. 30, 2013.”
The release added that, “The payment rate for September 2012 is approximately $0.59 per hundredweight. The payment rate for October 2012 marketings is approximately $0.02 per hundredweight. The payment rate for November 2012 marketings is zero.”
A recent editorial at Hoard’s Dairyman Online noted that, “As far as dairy is concerned, 2013 will be much of the same with renewal of the MILC program (Milk Income Loss Contract), Dairy Export Incentive Program (DEIP) and dairy product price supports. Unfortunately, DEIP and the dairy price support program represent outdated safety net initiatives that offer no peace of mind for dairy producers nor does it account for the escalating price of feed. That being the case, neither will generate stability under current market conditions. While MILC was renewed with a $7.35 ration adjuster at 45 percent of production, it too offers no projected support based on current futures contracts. Plus, not all milk production is eligible due to its production caps.
“In light of the legislative stalemate, the Dairy Security Act (DSA) was kicked to the wayside. While it didn’t receive praise from many processors and a few producer groups due to production controls during periods of high milk supply, it did offer margin protection or insurance based on a balanced approach of milk prices and feed costs. The DSA also represented the broadest and most public dairy producer led policy discussion our industry has seen in some time.”
Meanwhile, Jim Dickrell noted on Tuesday at AgWeb Online that, “If the farm bill is ever to pass, it will have to go through a more normal legislative process, say lobbyists who have worked on Capitol Hill for years.
“It cannot be wedged into larger budget bills that get rammed through Congress without debate.”
Pete Kasperowicz reported on Friday at The Hill’s Floor Action Blog that, “Whatever show of bipartisanship Republicans and Democrats manage to put on during President Obama’s State of the Union address on Tuesday, 2012 is already looking like another year of bitter divide over what has become the political question of our time: How much should government spend?
“Obama has made a recent nod toward cutting the deficit, by combining several economic agencies into one. He’s likely to remind his GOP critics of this proposal during Tuesday night’s speech.
“But outside the glare of the speech, Republicans are already planning their next assault on federal spending. Tuesday and Wednesday, the House Budget Committee will mark up bills that seek to end the automatic inflation of budget items, require a macroeconomic analysis o the budget, and ensure that the congressional budget resolution has the force of law.”
Linda H. Smith reported yesterday at DTN (link requires subscription) that, “Midwest corn and soybean growers could see savings of $2 to $3.50 an acre on their crop insurance premiums next year after USDA’s Risk Management Agency re-rated the two crops using a new formula.
“RMA on Monday announced the results of re-rating states actuarially, using a 20-year rolling average (currently 1990 through 2010).
“‘On average, these new rates should reduce corn farmers’ rates by 7% and soybean farmers’ by 9%,’ said RMA Administrator Bill Murphy. Given most Midwest farmers pay between $30 and $50 an acre for crop insurance, they could see savings of $2 to $3.50 per acre. A few states such as Texas and Pennsylvania will see modest increases because of their loss experience.”
And earlier this month, we noted that potential changes in farm policy in the U.S., given the probability of the Farm Bill intersecting with the supercommittee, was moving at a much more rapid pace than in the EU.
More recently, an update posted yesterday at EUractive Online reported that, “Agriculture Commissioner Dacian Cioloş faced a barrage of criticism yesterday (7 November) over plans to overhaul the Common Agricultural Policy (CAP) before a rare gathering of national farm ministers and members of the European Parliament.
As lawmakers in the United States are on the cusp of presenting a quickly formulated farm policy proposal that could be presented to the supercommittee, and ultimately included in the 12-member bi-cameral, bi-partisan group’s deficit reduction plan that Congress could vote on by the end of the year, farm policy changes in the EU appear to be moving forward at a much slower pace.
“‘The impression I get is that all of us (EU farm ministers) have given them (the European Commission) a pretty poor response,’ Farming Minister Jim Paice told reporters at the CropWorld 2011 conference.
“‘There were many different viewpoints from member states,’ he said, referring to comments made at a meeting of farm ministers a few days ago. ‘The one common theme was a need for simplicity and a widespread perception that the proposals are making life more complicated.’”
The Reuters article noted that, “Paice said it was unlikely an agreement would be reached in time to be implemented in 2014 and there needed to be discussion about an interim plan.”
“Some countries such as Poland do not believe the plan goes far enough to even out the imbalances in aid paid to farmers in western Europe versus less well-off producers in the east,” Monday’s article said.
Meanwhile, Jan Cienski reported today at The Financial Times Online that, “Czeslaw Janicki sits behind the wheel of his battered Toyota 4×4 and slowly drives us round a large open area between two long low barns crowded with black and white Holstein-Friesian cattle.
“‘Look how clean they are – this is modern agriculture,’ he says proudly before we bump off down a narrow asphalt road. He gestures at the large fields to the left and the right. ‘All of this land belongs to us.’”
The FT article explained that, “Mr Janicki and his farm show the new face of agriculture in Poland, moving on from the stereotype of tiny fields worked by peasants with horse-drawn ploughs.”
Tuesday’s article pointed out that, “A significant factor in the transformation of agriculture has been the EU’s common agricultural policy (CAP), which this year is expected to pay out €3.3bn to Polish farmers. EU funds account for most of Mr Janicki’s profit, but the money has also made it possible for a huge number of small and unproductive farmers to stay on the land.
“‘For many farmers, the EU funds are a question of whether or not they will continue to exist,’ says Bozena Karwat-Wozniak of the Institute of Agricultural and Food Economics, a Polish research institute.
“She points out that CAP subsidies alone amount to about a fifth of farm earnings, while billions more in EU funds for modernisation and ecological programmes have helped revive the countryside.”
Reuters writer Charles Abbott reported yesterday that, “U.S. farm subsidy cuts of $23 billion would be tied to the creation of a new crop subsidy system under a plan being discussed by Agriculture Committee leaders in Congress, farm lobbyists said on Thursday.
“The proposal would end the $5 billion-a-year direct payment subsidy. It would endorse a revenue-assistance program to shield growers from ‘shallow losses’ from poor yields or low market prices as the new basis for the U.S. farm program.
“Leaders of the House and Senate agriculture committees aimed to outline the plan in a letter on Friday to the congressional ‘super committee’. That 12-member panel is charged with finding $1.2 trillion in government-wide cuts.”
Driven by worrying levels of U.S. debt, Congressional authorizing committees, including Agriculture, face a deadline tomorrow for submitting policy proposals to the Joint Select Committee on Deficit Reduction.
Meanwhile, policy makers and producers are preparing to make changes in agricultural budget allocations and programs in the European Union- a chief U.S. competitor.
Like here in the U.S., price volatility appears to be a concern of some agricultural producers in the EU.
David Jolly reported in Thursday’s New York Times that, “European Union officials on Wednesday proposed major changes to its expensive and contentious system of farm supports, calling for a cap on the amount that individual farms can receive and toughening environmental standards, but leaving the overall budget of the program unchanged.
“‘The effectiveness of our current policy has eroded,’ Dacian Ciolos, the European agriculture commissioner, said in Brussels. ‘Payments are based on a multitude of systems based on historical references that have lost their relevance and weakened by a lack of credibility and transparency with the public. We have to change the paradigm.’
“The proposed changes to the Common Agricultural Policy, whose budget is €56 billion, or $77 billion, set up what will very likely be months of confrontation between nations led by Britain, which argue that the current arrangement leads to unfair subsidization of farmers, and agricultural nations like France, which are relatively happy with things as they are.”
Mr. Jolly explained that, “Negotiations on the proposals, which need the backing of member states and the European Parliament, could be held through 2013.
“Pointing to some of the elements of the existing system that have invited the most withering criticism, Mr. Ciolos emphasized that aid would go only to those actively tilling their fields, saying, ‘I seriously doubt that the airports and golf courses need farm income support.’”
John W. Miller and Caroline Henshaw reported in today’s Wall Street Journal that, “Farm subsidies are paid out of the European Union’s budget but managed by its 27 member states. The subsidies make up two-fifths of the EU annual budget and are hotly debated when the EU writes its budget every seven years. The tenuous state of the region’s economy has heightened those tensions.
“The priorities in the plan are ‘food security, sustainable use of natural resources and growth,’ said Dacian Ciolos, the EU’s agriculture commissioner.
“Mr. Ciolos’s proposal will raise CAP spending by about €15 billion overall in 2014-2020, a move lawmakers say represents a cut of up to 15% in real terms.”
The Journal article added that, “The coming debate in the European Parliament and among the EU’s 27 governments promises to be an intense lobbying battle. Already, farmers are taking aim at the plan, which they say puts too much emphasis on environmental protection and doesn’t recognize that farms are for-profit businesses that must be unburdened by regulation.”
Reuters writer Charlie Dunmore pointed out yesterday that, “Critics of the bloc’s common agricultural policy (CAP) had urged the European Commission to take advantage of high global food prices and cut the huge subsidies it pays to farmers in a reform of the policy from 2014.
“But against a backdrop of increasing market volatility, resource scarcity and climate change, the Commission had already rejected calls for subsidy cuts, and said the reform should refocus spending on the threats facing EU farmers.”
Joshua Chaffin reported yesterday at The Financial Times Online that, “In an interview with the Financial Times, Mr Ciolos pointed to the extreme volatility of world prices as a factor that justified continued high subsidies.
“‘The market orientation decided more than 10 years ago is a very good thing, but now we have to imagine a new instrument in order to deal with price volatility and the increase in world demand,’ he said, warning that those forces could ‘destabilize our agricultural system if we are not able to adapt.’
“Mr Ciolos’ proposals mark the beginning of what will be one of the most contentious debates in Brussels over the next 18 months. While the UK has long called for the dismantling of the CAP, arguing that its maze of subsidies are wasteful and distort competition, France has defended it as a cornerstone of Europe’s post-war prosperity.”
Farm Bill Issues: Budget- Super Committee Roster Complete
Robert Pear and Jennifer Steinhauer reported in today’s New York Times that, “The House Democratic leader, Nancy Pelosi, rounded out the membership of a powerful new deficit-reduction panel on Thursday by appointing three of her top lieutenants who have led opposition to cuts in Social Security, Medicare and Medicaid.
“The new appointees are Representatives Xavier Becerra of California, the vice chairman of the House Democratic Caucus [related statement]; James E. Clyburn of South Carolina, the assistant House Democratic leader [related statement]; and Chris Van Hollen of Maryland, the senior Democrat on the Budget Committee [related statement].
“In announcing her picks, Ms. Pelosi said the new panel, the Joint Select Committee on Deficit Reduction, must find ways to stimulate economic growth and create jobs.”
The AP reported yesterday that, “President Barack Obama plans to create a special advisory council to recommend ways to boost the economic outlook and quality of life for the estimated 60 million people who live in rural areas of the U.S., a White House official said.
“Obama was expected to sign an executive order Thursday establishing the White House Rural Council and naming Agriculture Secretary Tom Vilsack, of Iowa, to be its chairman.”
DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “With budget-cutting in vogue, Sen. Charles Grassley is dusting off his long-time proposal to put a hard cap on farm-program payments.
“Grassley, an Iowa Republican, told reporters Tuesday that he is introducing ‘The Rural American Preservation Act’ that would put a $125,000 cap on farm payments for individuals and a $250,000 cap for married couples.
“‘We need to not subsidize big farmers getting bigger and driving up the costs of farmland and cash rents so younger, beginning farmers can’t get started,’ Grassley said.”
Erik Wasson reported yesterday at The Hill Online that, “A Democratic appropriator this week successfully convinced Republican appropriators to reduce a cut to child nutrition, but Democrats have only faint hope that the rare victory can be repeated.
“Rep. Rosa DeLauro (D-Conn.) was able late Tuesday to convince her colleagues on the House Appropriations Committee to restore $147 million to the Women, Infants and Children (WIC) food assistance program, which otherwise would have been cut by $832 million, or 12 percent, in the 2012 agriculture bill.
Reuters writer Charles Abbott reported on Tuesday night that, “A House committee voted to cut off crop subsidies to growers with more than $250,000 a year in adjusted gross income on Tuesday — a dramatic tightening of the farm safety net.
DTN Ag Policy Editor Chris Clayton reported on Friday that, “Congress has largely ignored proposals from the Obama administration to cut program payments to some of the nation’s larger farms. But, Secretary of Agriculture Tom Vilsack’s push to spend more money on rural development and spend less on farm programs is drawing some ire from lawmakers who want to preserve the current safety net for commercial farmers.
“Vilsack has been accused of promoting ‘bedroom communities’ and wasting precious budget resources to prop up the urban locavore movement at the expense of production agriculture. Last week, Sens. Saxby Chambliss, R-Ga., Pat Roberts, R-Kan., and John McCain, R-Ariz., wrote a letter complaining that USDA spent $65 million last year on the ‘Know Your Farmer, Know Your Food’ program and is expanding the program this year.”
The Washington Insider section of DTN reported yesterday (link requires subscription) that, “Following [last Wednesday’s Ag Committee hearing], [Ag Committee Chairman Collin Peterson] told the press he expects fundamental changes in U.S. farm policy this time, and there will be ‘little room for the status quo’ in the 2012 bill. To achieve that, he thinks it will be important to, ‘… get all this stuff out there, get it all on the table so everyone understands what’s what. Let’s have an honest discussion … and work together to come up with the most rational risk-management type of system we can.’”
“[Chairman Peterson] commented that the current programs overlap each other and the crop insurance programs, and suggested there will be ‘no money available to increase the subsidy rates under existing programs as some commodity groups want.’ As a result, he is looking to make fundamental changes in the way ‘corn and other crops’ are subsidized when Congress writes the next farm bill in 2012.
“One idea is to link subsidies more to swings in farm revenue rather than commodity prices. ‘Let’s come up with the best risk management system that we can,’ he said. He further commented that this might lead to integrating the current subsidies with crop insurance, ‘in some way.’ He further suggested that in a couple of decades, crop insurance likely will be ‘the single way that the government subsidizes farmers,’ in part because an insurance program is easier to sell to urban voters than the conventional subsidy programs.”