FarmPolicy

December 14, 2017

Chairman Conaway on Farm Policy and Food Prices, Related ERS Update

Categories: Farm Bill /Food Prices

Recall that over the weekend, Senate Ag Committee Chairman Pat Roberts (R., Kans.) and House Ag Committee Chairman Mike Conaway (R., Tex.) discussed a variety of current issues impacting the U.S. agricultural economy and farm policy at the Kansas State Fair in Hutchinson.

In particular, before embarking on changes to federal agricultural policies, Chairman Conaway said that he wanted “to know what it does to the cost of food.” He added that “we have 45 million Americans on food stamps [SNAP],” when he analyses farm policies he thinks in terms of what we are getting in return for government investment- and current policies are working, “there is no denying that,” he said.

Noting that on average, Americans spend 9.8% of disposable income on food, Chairman Conaway indicated that,“what I care about is the folks at the bottom 20% of the economic food chain, it’s not 9.8% of their disposable income, they are paying 30-35% of their disposable income for food.”

With this background on the importance of food costs to policy makers in mind, the USDA’s Economic Research Service (ERS) indicated last week (“Percent of Income Spent on Food Falls as Income Rises“) that, “[P]oorer households spend less money on food than higher income households, but this accounts for a greater share of their income.”

The ERS update indicated that, “Over the past two and a half decades, U.S. households in the lowest income quintile (the poorest 20 percent of households) spent between 28.8 and 42.6 percent of their annual before-tax income on food, compared with 6.5 to 9.2 percent spent by households in the highest income quintile. Before-tax income includes earnings and other money income, public assistance, Supplemental Security Income payments, and Supplemental Nutrition Assistance Program (SNAP) benefits.

The share of income spent on food is more volatile for poorer households than for higher income households. The lowest income households saw their share of income spent on food drop from 41.1 to 28.8 percent over the years 2001 to 2007 but then rise to 35.5 percent in 2009. Meanwhile, over the same period, the highest income households saw relatively minor yearly swings of 0.5 to 1.0 percentage points.”

The ERS report explained that, “This volatility in the share of income spent on food by the lowest income quintile is due in part to (1) changes in grocery store (food-at-home) prices and (2) changes in earned income and Federal assistance benefits. The 2001 jump in the share of income spent on food by the lowest income quintile illustrates the impact of rising food prices. Although incomes were steadily increasing for low-income households at this time, at-home food prices increased by 3.3 percent from 2000 to 2001. Higher food prices disproportionately affect the spending behavior of low-income households and often require them to allocate a larger share of their incomes to food.”

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Sunday Update: Policy Issues; Ag Economy; and, Biofuels

Reminder: Only four reports left, FarmPolicy.com ends Friday.

Policy Issues

Reuters writer Christine Stebbins reported on Friday that, “U.S. farmers will have another week to enroll in the government’s new subsidy programs under the five-year farm bill, with the deadline extended to April 7, the U.S. Department of Agriculture said on Friday.

“The final day for farmers to update their crop acreage and yield history, the first step to qualify for the new subsidies, will be extended to April 7. The farmers had already had the deadline to update their acreage data extended by one month to March 31.”

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Policy Issues; Ag Economy; Trade; and, Biofuels

Policy Issues

A recent update at the Red River Farm Network Online indicated that, “Minnesota Congressman Collin Peterson, who is the ranking member on the House Agriculture Committee, says the heavy lifting is done for the 2014 farm bill. ‘We’ve got everybody on board now with a position that it is not going to be reopened so now the issue is making sure it is implemented correctly.’ While it won’t be reopened, Peterson says the farm bill will likely be subject to criticism once the costs become known. ‘I think people are going to be surprised at how much this is going to end up costing, which is what I was afraid of at the time we passed the bill,’ said Peterson, ‘For example, Iowa and, probably, Minnesota look like they’re going to sign up for the ARC so you’re going to have corn farmers that were getting $20 an acre in direct payments that are going to get $90 an acre and that will cause a commotion.’”

The full interview with RRFN’s Mike Hergert and Rep. Peterson is available here (MP3- 8:00).

The RRFN update also noted that, “South Dakota Senator John Thune was concerned about retaining the target price, which is now known as the reference price, program when the farm bill was written. ‘With commodity prices now falling, I think people may start farming for the farm program instead the market,’ Thune told RRFN [MP3], ‘I was concerned about that and I think that will increase dramatically the cost of the farm bill.’ Thune worries that may create the temptation to reopen the farm bill and ‘I’m very concerned about that.’”

And recall that late last week, Mike Hergert interviewed House Ag Committee Chairman Mike Conaway (R., Tex.), who noted in part that, “We’ll take an approach that says you want to spend $80 billion a year on food stamps? Let’s take a look at that and let’s see what works, what doesn’t work, and let’s understand the program. Let’s reevaluate how that program is considered successful by looking at how quickly folks can get off the program, back on their own two feet, taking care of their own families, as opposed to the current model that says, you know, it’s successful the longer you stay on it. So we’ll be going through that.”

Mr. Hergert’s full interview with Chairman Conaway is available here (MP3- 6:00); see also this photo from the House Ag Committee’s Instagram webpage with a caption that noted: “I had a blast talking with Mike Hergert with the #RedRiver #Farm Network. Ag reporters like Mike who ask good questions & get the facts right provide a service to our democracy & specifically to our #farmers & #ranchers. The farmers in #NorthDakota & #Minnesota are lucky to have Mike working for them

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Ag Economy; Policy Issues; Immigration; and, Trade

Agricultural Economy

Emiko Terazono reported yesterday at The Financial Times Online that, “Global food prices fell to the lowest level in four years in 2014, as plentiful supplies of cereals, dairy products, sugar and vegetable oils pushed markets lower.

“The UN Food and Agricultural Organization said its December food price index fell more than 9 per cent from a year before. In 2014, the index averaged 202 points, down 3.7 per cent from 2013, the third consecutive yearly fall.”

The FT article pointed out that, “Dairy products faced the largest declines, thanks to a rise in exports and demand falling among some of the leading importers, such as China and Russia. Prices, which started the year at record highs, fell 34 per cent in December from a year before, helped by declines in milk powders, butter and cheese.”

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Ag Economy; Tax Extenders; Policy Issues; Budget- Immigration; Regs; and, the RFS

Agricultural Economy

The U.S. Department of Agriculture’s Economic Research Service (ERS) updated its 2014 Farm Sector Income Forecast yesterday, and noted that, “Net farm income is forecast to be $96.9 billion in 2014, down 21.1 percent from 2013’s estimate of $122.8 billion. The 2014 forecast would be the lowest since 2010, but would remain $16 billion above the previous 10-year average ($80.8 billion) [related graph].”

ERS indicated that, “The annual value of U.S. crop production is expected to decline in 2014 from 2013’s all-time high [related graph]…[C]orn production has increased significantly since the 2012 marketing year, with corn exports more than doubling. Soybean production has also increased significantly since the 2012 marketing year as have soybean exports.”

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Broad Policy Issues; Farm-Food Policy; Ag Economy; and, Regulations

Broad Policy Issues- Budget, Taxes, Immigration, and Trade

Budget, and Taxes

Lori Montgomery and Ed O’Keefe reported in today’s Washington Post that, “Before ceding full control of Congress to the GOP in January, Senate Democrats are planning to rush a host of critical measures to President Obama’s desk, including bills to revive dozens of expired tax breaks and avoid a government shutdown for another year.”

The Post writers explained that, “Republican leaders, too, are inclined to clear the legislative decks of must-pass bills so they can start fresh in January, when they will have control of both chambers of Congress for the first time in eight years. Leaders from both parties are due at the White House for a lunch Friday to begin discussing the parameters of the possible in a new era of Republican domination.”

Today’s article noted that, “House and Senate negotiators have been at work for weeks on a comprehensive bill to fund federal agencies through next September, and aides said they hope to bring the measure to a vote before the Dec. 11 deadline.

Some conservatives are agitating for a temporary measure that would allow Republicans to revisit agency funding levels when they take charge early next year. But Republican leaders, including Sen. Mitch McConnell (Ky.), would rather get the bills for fiscal 2015, which began in October, out of the way so they can focus on crafting a budget for fiscal 2016.”

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Ag Economy; Biotech; C.O.O.L; and, Political Notes

Agricultural Economy

University of Illinois agricultural economist Gary Schnitkey indicated on Friday at the farmdoc daily blog (“Cash Deficits Projected for Corn in 2014 and 2015”) that, “In Tuesday’s article (farmdoc daily, October 21, 2014), gross revenue from corn was projected to be much lower in 2014 and 2015 than in 2011 through 2013. Total costs are compared to gross revenues in this article. For cash rent farmland, total costs are projected higher than gross revenue in 2014 and 2015. Projected losses are over $100 per acre in 2014 and 2015 [related graph].”

The farmdoc update noted that, “Given a cash rent situation, losses are projected for both 2014 and 2015. A -$109 per acre loss is projected for 2014 and a -$143 loss is projected for 2015. These are large losses from a historical standpoint. The only other time that a loss occurred since 2000 was in 2009. In 2009, gross revenue minus total costs equaled -$21 per acre.”

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Ag Economy; Farm Bill; Biotech; Biofuels; Regulations; and, Immigration

Agricultural Economy

Reuters News reported yesterday that, “World food prices fell to their lowest since August 2010 in September as prices of all major food groups except meat dropped, led by a sharp decline in dairy prices, the UN’s food agency said on Thursday.

“The Food and Agriculture Organisation’s (FAO) price index, which measures monthly price changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 191.5 points in September, down 5.2 points or 2.6 percent from August.

“The figure was 12.2 points or 6.0 percent below September 2013 [related graph].”

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Policy Issues; Ag Economy; Biotech; Regulations; and, Political Notes

Policy Issues

A news release yesterday from the House Ag Committee stated that, “Today, Chairman Frank Lucas held a public hearing to review the implementation of state pilot projects under the Supplemental Nutrition Assistance Program (SNAP) of the Agricultural Act of 2014. SNAP is designed primarily to increase the food purchasing power of eligible low-income households to help them buy a nutritional, low-cost diet. One of the reforms in the 2014 Farm Bill included new Employment and Training pilot projects. They allow for up to ten states to develop and test methods to help adults secure employment and job training and reduce their dependency on SNAP.”

Chairman Lucas noted at yesterday’s hearing that, “The Agricultural Act provides up to ten states, with up to $200 million, to operate pilot projects designed to help SNAP recipients prepare for and go to work. The law explains that the approved pilot projects must cover a range of geographic areas, include a mix of voluntary and mandatory participation, and include an assortment of methods designed to promote work.”

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Ag Economy; Policy Issues; Biofuels; and, Regulations

Agricultural Economy

Reuters writer Ros Krasny reported on Friday that, “Overall U.S. food inflation will remain near the historic norm in 2014, even as prices for meat and seafood are pushed higher by disease and widespread drought, the U.S. Department of Agriculture said on Friday.”

The Reuters article explained that, “But drought conditions in California and other states could further drive up prices of fresh produce and beef, the USDA warned.

“The agency forecast wholesale pork prices to jump by 10 percent to 11 percent in 2014, hurt by declining supplies after a virus has killed some 7 million piglets in the past year.

“Wholesale beef prices are forecast to jump by 8 percent to 9 percent in 2014, although rising imports are helping to offset some of the decline in domestic supplies.”

Friday’s article added that, “‘The ongoing drought in California could potentially have large and lasting effects on fruit, vegetable, dairy and egg prices, and drought conditions in Texas and Oklahoma could drive beef prices up even further,’ the USDA said.”

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Ag Economy; Policy Issues; and, Political Notes (Rep. Collin Peterson)

Agricultural Economy

Bloomberg writer Jeff Wilson reported yesterday that, “The 8-foot (2.4-meter) corn stalks on Bill Long’s farm in southern Illinois are so big, green and healthy that he wishes he’d sold more of it sooner.

“Like many growers across the Midwest, Long expects a second straight record crop that will boost domestic stockpiles already at a four-year high. Output in the U.S. will jump 2.8 percent to 14.314 billion bushels, the most ever, researcher The Linn Group Inc. estimated in a July 1 report. Even after fewer acres were planted, the wettest June on record left fields in the best condition since 2003 and sent prices into a bear market two months before the harvest starts.

“‘There is a wall of grain coming at us,’ said Roy Huckabay, an executive vice president at Linn Group in Chicago, said in a telephone interview July 2.”

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Ag Appropriations- Policy Issues; Ag Economy; Regulations; and, Biofuels

Agriculture Appropriations- Policy Issues

The House Majority Leader’s Weekly Schedule for July 7 does not include a reference to the Agriculture Appropriations measure.

Recall that the Ag Appropriations bill contains a provision, “to allow school districts to temporarily opt out of school dietary requirements championed by first lady Michelle Obama.”

Robert Gebelhoff reported earlier this week at the Milwaukee Journal Sentinel Online that, “Schools across the nation are preparing to work with stricter standards for nutrition from the U.S. Department of Agriculture, as part of a nationwide campaign championed by first lady Michelle Obama to eliminate empty calories. The new standards took effect Tuesday for all schools that participate in the National School Lunch Program and will build off previously implemented standards that limited serving sizes and restricted what food was healthy enough for the program.

“What can students expect to find? Wheat bread, low-calorie drinks, meals with limited sugar, fat and salt.

Some district officials are saying they’re all for healthy food, but they have to sell enough hot lunches to break even on their program — and that won’t work if the kids shun the food. They also are a little prickly about federal officials telling them what to do.”

Mr. Gebelhoff explained that, “Frustration by schools and parents across the country prompted Republicans in Congress to propose a waiver system that would allow schools strapped for cash the chance to receive federal subsidies from the government without having to comply with the USDA’s requirements. If it becomes law, schools that can demonstrate a net loss over a six-month period in their food service would be eligible to operate outside the standards.”

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Ag Economy; Biotech; Regulations; Policy Issues; and, Immigration

Agricultural Economy

Gregory Meyer reported yesterday at The Financial Times Online that, “The chances of finding a bull in a maize field are near zero right now. With each passing week, a blockbuster harvest of corn in the US – the world’s largest producer – is looking more and more likely.

“Spot corn prices have responded. They are down a third in the past year and weighing on commodity indices. On Monday the market for the most widely traded grain will face a further test when the government issues a pair of crucial supply and demand reports.”

The FT article noted that, “It is too early to make precise harvest forecasts with confidence. Two years ago, a complacent market caught fire as extreme heat descended on the Midwest and lingered throughout corn’s sensitive pollination stage. The end result: a decimated crop and prices above $8 per bushel.

“Joel Widenor, meteorologist at Commodity Weather Group, says a similar heatwave this year would cause problems. But soils now are more moist than in 2012, making plants more resilient and damping the hottest daytime temperatures, he adds. For now, excessive heat is not predicted.”

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Ag Economy; and Farm Bill Issues

Agricultural Economy

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Pork producers who have hogs testing positive for porcine epidemic diarrhea virus now will be required to report the outbreak to USDA and develop a strategy for improving biosecurity measures on their farm.

“USDA issued a federal order on Thursday requiring pork producers to notify the department when their hog herds test positive for PEDV. Producers must notify their veterinarians or the state veterinarian’s office about positive cases.

“While mandating producers report the disease, Agriculture Secretary Tom Vilsack told pork producers at the World Pork Expo that the federal order does not require herd quarantines or restrictions on the movement of animals. Those issues had been major concerns by industry leaders when USDA announced in April that it would get more engaged in trying to stem the spread of PEDV.”

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Farm Bill; Nutrition Issues; Ag Economy; Regs; and, Immigration

Farm Bill- Conservation

AP writer John Flesher reported yesterday that, “The U.S. Department of Agriculture is teaming with businesses, nonprofits and others on a five-year, $2.4 billion program that will fund locally designed soil and water conservation projects nationwide, Secretary Tom Vilsack said Tuesday.

“Authorized by the new farm law enacted earlier this year, the Regional Conservation Partnership Program is intended to involve the private sector more directly in planning and funding environmental protection initiatives tied to agriculture [see related USDA video].

“‘It’s a new approach to conservation that is really going to encourage people to think in very innovative and creative ways,’ Vilsack said.”

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Agriculture Appropriations; Drought Legislation; Regulations; and, Food Prices

Agriculture Appropriations, Farm Bill 

The House Appropriations Committee will meet on Thursday this week to markup the FY 2015 Agriculture Appropriations Bill.

Last week the House Agriculture Appropriations Subcommittee approved spending language that “would require the Agriculture Department to waive requirements to serve fruits, vegetables and low-sodium and low-fat foods for schools that can show their lunch programs are losing money” (The Hill, “House panel cuts school nutrition standards.”).

And recall that last Thursday, the Senate Appropriations Committee adopted fiscal year 2015 spending allocations for Agriculture.

David Rogers reported last week at Politico that, “[T]he [Sen. Appropriations] committee also opted for compromise and gave Agriculture Secretary Tom Vilsack some flexibility in addressing complaints from school districts regarding the level of whole-grain foods they must include in lunch and breakfast meals.”

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