FarmPolicy

March 24, 2017

Bayer to Acquire Monsanto, Creating “Farm Giant”

On Wednesday, Bayer and Monsanto announced that they signed a definitive agreement under which Bayer will acquire Monsanto.

Thursday’s Wall Street Journal had two above the fold articles covering this development.

In the lede article in Thursday’s paper, Jacob Bunge and Christopher Alessi reported that, “Monsanto Co. agreed to sell itself to Bayer AG after months of haggling, in a $57 billion deal that would create an agricultural powerhouse and end the independence of one of the most successful and controversial companies in the U.S.

“If regulators approve the deal, which was unveiled Wednesday, the German pharmaceutical and chemical conglomerate would inherit Monsanto’s market-leading position in seeds and crop genes. That would tilt Bayer heavily toward agriculture in a long-range bet on high-tech crops to sustain a growing global population.”

The Journal writers noted that, “In the near term, the sale of St. Louis-based Monsanto, long a ubiquitous presence in American agriculture, spotlights a sagging U.S. farm economy that shows few signs of rebounding as farmers prepare to reap another in a string of record corn and soybean crops this autumn.

The Bayer-Monsanto union is the latest in a wave of tie-ups that have reordered the $100 billion global market in crop seeds and pesticides in the past 10 months. Major fertilizer producers also have pursued deals. Seed makers, having laid off thousands of employees and mothballed some research projects, regard mergers as a way to cut costs while more deeply integrating the development of new seeds and chemicals.”

The Journal article added that, “Bayer plans to fuse its prowess in pesticides—it ranks among the world’s largest suppliers—with Monsanto’s capabilities in seed genetics and biotechnology, which have allowed it to develop corn, soybeans, cotton and other crops that can survive weed-killing sprays and make natural toxins to repel bugs. The merged company would be the largest supplier by sales of both seeds and pesticides.”

This article also noted that, “While farmers prize biotech seeds for simplifying weed and insect control, they also have locked horns with Monsanto. At times they have bridled at the higher cost and the company’s efforts to protect its intellectual property; it sometimes has taken farmers to court when it suspected them of illegally saving and replanting its seeds.”

In the second article from the the front page of Thursday’s WSJ, Mr. Bunge reported that, “Behind a wave of multibillion-dollar mergers in the agriculture business is a moment of change in American farming. The dominance of genetically modified crops is under threat.

“Since their introduction to U.S. farms 20 years ago, genetically engineered seeds have become like mobile phones—multifunctional and ubiquitous. Scientists inserted genes to make crops repel insects, survive amid powerful herbicides, survive on less water and yield oils with less saturated fat, in turn eliminating farmers’ amateur chemistry. The U.S. Department of Agriculture estimates this year that 94% of soybean acres were planted with biotech varieties, and 92% of corn acres.

Today, farmers are finding it harder to justify the high and often rising prices for modified, or GMO, seed, given the measly returns of the current farm economy. Spending on crop seeds has nearly quadrupled since 1996, when Monsanto Co. became the first of the companies to launch biotech varieties. Yet major crop prices have skidded lower for three years, and this year, many farmers stand to lose money.”

The Journal article stated that, “Biotech farming has also shown limitations, given how certain weeds are evolving to resist sprays, forcing farmers to fork out for a broader array of chemicals. Some are starting to seek out old-fashioned seed, citing diminished returns from biotech bells and whistles.”

Mr. Bunge noted that, “Robert Fraley, Monsanto’s chief technology officer who helped develop the company’s earliest incarnations of genetically engineered crops in the 1980s, said farmers will remain faithful to biotech crops.”

“Kyle Stackhouse, who grows about 1,600 acres of corn and soybeans near Plymouth, Ind., is questioning the high-price seeds’ value,” the Journal article said, while adding that, “Mr. Stackhouse estimates he typically spends about $53 per acre on soybean seeds and $40 on pesticides, versus $83 he would have spent on biotech soybean seeds an additional and $24 on related crop chemicals. That puts him ahead about $14 per acre on costs. Mr. Stackhouse says he has planted no biotech crops for three years.”

The article concluding by pointing out that, “[Jim Kline, president of Kline Family Farms, which raises corn, soybeans and wheat near Hartford City, Ind.], in mid-September was repairing a combine as he prepared to harvest this year’s corn crop, each plant containing genes protecting against Roundup and root-chewing worms. But he has already placed orders to reserve seed for next year, when he anticipates that only about two-thirds of his cornfields will be sown with genetically engineered seeds.

“‘Commodity prices go down every day,’ Mr. Kline said. Since biotech farming isn’t working as well as it once did, he said, ‘why spend the money?.'”

Meanwhile, Leslie Picker, Danny Hakim and Michael J. de la Merced reported on the front page of the business section in Thursday’s New York Times that, “Don Halcomb, a 63-year-old farmer in Adairville, Ky., is expecting his profit to vanish this year, largely because of the confluence of falling crop prices and rising costs for seeds and other materials.

“The price of an 80,000-kernel bag of seed corn rose to $300 from $80 in the last decade, as the companies that produced them consolidated, he said. And with the recent decline in commodity prices, Mr. Halcomb said he expects to lose $100 an acre this year.

“‘We’re producing our crops at a loss now, just like the oil guys are pumping oil at a loss,’ Mr. Halcomb, who grows corn, soybeans, wheat and barley on his 7,000-acre family farm, said by telephone on Wednesday. ‘You can’t cut your costs fast enough.'”

Front page of the Business Section of Thursday’s New York Times

The Times writers explained that, “It is a common plight of farmers across the United States, with the global agriculture industry in a wrenching downturn. Because farmers have produced too much corn, wheat and soybeans, they have been forced to slash prices to sell their crops. They have also reduced spending on seeds, pesticides and fertilizer, which has eaten into sales at agribusiness giants, including Monsanto and DuPont.

In response, these companies have sought multibillion-dollar deals to cut costs and weather the industry’s storm. Four major agribusiness mergers have been announced in the last year. The latest is Bayer AG’s $56 billion takeover of Monsanto — the largest acquisition of 2016 — announced on Wednesday. Every merger creates the possibility of higher costs for farmers.”

The Times article stated that, “Bayer and Monsanto said they planned to cut about $1.2 billion worth of costs as part of the deal, helping to improve efficiency.”

The trio of Times writers added that, “Christine Hamilton manages a farm of more than 12,000 acres in Kimball, S.D., growing crops like corn and operating a ranch. She said that if the deal can pass the antitrust screening, then maybe it could actually help farmers.

“‘I understand how companies need to get bigger in order to be competitive,’ she said. ‘As we are in a low part of the cycle, anything that might have a chance of reducing our input prices would be great.'”

In a similarly based look at the potential impact of large agri-business deals, Christopher Doering reported on the front page of Thursday’s Des Moines Register (picture, right) that, “Iowa farmers are anxiously waiting to see if they will be helped or harmed by the purchase of seed giant Monsanto Co. by Germany’s Bayer AG — a deal that could shrink competition and increase prices, but also raises the prospect of better seeds and chemical products that could bolster their profits.”

The Register article indicated that, “‘It’s mixed emotions for all of us in farming and agriculture,’ said Ray Gaesser, a corn and soybean producer in Corning, Ia., who has been farming since 1967. ‘We definitely need new traits. Finding the best avenue to get that done is what we should be after, but at the same time we’re concerned about the consolidation and being down to three or four majors instead of six we had even a year ago.'”

James F. Peltz reported on the front page of the business section in Thursday’s Los Angeles Times that, “Farm profits are forecast to drop for the third straight year in 2016 to their lowest level since 2009, according to the U.S. Department of Agriculture.

“In turn, spending on seeds and pesticides as been flat or down in the last three years, the agency said.

“The deal may also be the catalyst needed to start a new green revolution where investment in R&D in seed and crop-chemical combination solutions could significantly increase global crop yields,” said Christopher Shanahan, agriculture and nutrition director at consulting firm Frost & Sullivan.”

With respect to the regulatory aspects of the Bayer/Monsanto deal, Reuters writers Diane Bartz and Greg Roumeliotis reported today that, “U.S. Senate Judiciary Committee Chairman Chuck Grassley has called a hearing next Tuesday to scrutinize the wave of consolidation. Farmers in Iowa, the Republican senator’s home state, are worried that seed and chemical costs are rising while grain prices are near their lowest levels in years. Farm incomes have plunged.

“Senator Bernie Sanders, who recently ended a run for the Democratic presidential nomination, called the deal ‘a threat to all Americans.’

“‘These mergers boost the profits of huge corporations and leave Americans paying even higher prices,’ he said.”

The Reuters article added that, “Senators Mike Lee and Amy Klobuchar, the two top antitrust lawmakers, also expressed concern. ‘The transaction has the potential to result in a significant loss of competition and reduced incentives and ability to innovate, thereby raising prices,’ said Lee, a Republican from Utah.”

And Jacob Bunge reported yesterday at The Wall Street Journal Online that, “To secure its deal to buy Monsanto Co. for $57 billion, Bayer AG will require approvals from a host of government regulators already scrutinizing a wave of consolidation in the agricultural sector.

“While Monsanto’s seed-focused business doesn’t vastly overlap with Bayer’s pesticide-heavy agricultural franchise, combining two of the world’s largest farm suppliers will test the tolerance of farmers and politicians already wary of multibillion-dollar deals to merge other top players in the $100 billion global market for seeds and pesticides, while fertilizer producers also consolidate.”

Mr. Bunge noted that, “The companies have had ‘some initial contacts with regulatory agencies describing what this combination would be about,’ Bayer Chief Executive Werner Baumann said on a call with investors after the deal was announced. ‘We have so far received encouraging feedback but nothing beyond that.’ He said regulatory filings will now begin.

“Monsanto CEO Hugh Grant said on the call that between the two companies, ‘the overlap is quite small, with a few obvious exceptions.’ One area of overlap frequently cited as possibly prompting divestitures is seeds. ‘We feel quite good’ regarding regulatory approval, Mr. Grant said.”

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Chairman Conaway Addresses Regulatory Issues on the House Floor

Categories: Regulations

Yesterday, House Ag Committee Chairman Mike Conaway (R., Tex.) spoke on the House floor about executive branch regulatory actions that are negatively impacting agricultural producers.

Chairman Conaway noted that:

“Farmers, ranchers and foresters take great pride in their stewardship of the land. They are the original conservationists. And while it may be popular among some to blame farmers and ranchers for any and every environmental concern that crops up, I know that nobody cares more for the environment than those who work the land every day. When a farm family’s livelihood depends on caring for natural resources, there is an undeniable economic incentive to adopt practices that enhance the land’s long-term viability.

“Unfortunately, the Obama Administration has pursued an agenda seemingly absent of any recognition of the consequences for rural America and production agriculture. Obama’s EPA is creating regulations that are burdensome, overreaching, and negatively affecting jobs and the rural economy.

“Perhaps the most poignant example is the EPA and Army Corps of Engineers’ recent power grab with the ‘Waters of the United States’ rule. Or, as EPA likes to call it – The Clean Water Rule. I’ll be frank – this rule is not about clean water. Everyone wants and deserves clean water. This rule simply embodies EPA’s insatiable appetite for power. When EPA Administrator Gina McCarthy testified before the House Committee on Agriculture in February, Members of the Committee brought forth many concerns with the ‘wotus’ rule. Numerous times, Administrator McCarthy brushed off their concerns with statements that were intended to assure us that farmers would have the same longstanding farming exemptions that were originally included in the Clean Water Act.

These verbal assurances give little comfort to farmers and ranchers who will face steep civil fines for any violation. While the EPA Administrator was telling the farming community they have nothing to fear with the new ‘wotus’ rule, a California farmer was being prosecuted by the Justice Department for simply plowing his field.

“The lawsuit brought against this producer claims that by plowing a field, which every farmer I know considers a normal farming practice, this farmer has created ‘mini mountain ranges’ in his field. These mountain ranges are furrows from normal farming. The suit also claims this producer discharge a pollutant into a waters of the U.S. This so-called ‘pollutant’ was the soil he was plowing.

“These perceived violations only came to attention when an overzealous Corps bureaucrat ‘just happened to be driving by the property’ and discovered perceived ‘wotus’ violations on the land.

“Regardless of the degree to which some deem government regulation justifiable, all regulations must be developed in a manner that is based on science and mindful of the economic consequences. This rule clearly was not. Farmers, ranchers and foresters believe the EPA is attacking them, and it is easy to understand why.

“Instead of using the EPA and Corps’ preferred strategy of fear and intimidation, coupled with punitive enforcement and overreaching regulatory authority, we should be building on the successful approach taken in the 2014 Farm Bill and farm bills prior to protect our natural resources through voluntary, incentive-based conservation programs.”

Waters of the U.S. Rule: Focus of Senate Debate, and Court Ruling

Categories: Regulations

A news release yesterday from Sen. John Hoeven (R., N.D.) indicated that, “[Sen. Hoeven] today spoke on the Senate floor ahead of a vote on his legislation to defund the Environmental Protection Agency’s (EPA) Waters of the U.S. rule, which would prevent its implementation. The senator stressed the rule’s severe impacts and excessive scope, as well as the agency’s lack of legal authority to issue such a broad regulation. The measure, which was offered as an amendment to the Energy and Water Development Appropriations bill, was supported by strong majority of the Senate, though it did not achieve the 60 votes required for passage; the final vote was 56 to 42.

“‘The EPA’s attempt to expand its reach through the Waters of the U.S. rule is the number one regulatory threat and a real problem for our farmers and ranchers,’ Hoeven said. ‘Further, there is a fundamental principle about how our government works at stake. The EPA has sought through administrative fiat to seize authority that legally belongs to Congress, not an executive agency. While I am disappointed that the vote failed, I will continue my work to stop this burdensome regulation through the appropriations process.'”

Also with respect to this amendment, Sen. Roy Blunt (R., Mo.) stated yesterday during the floor debate that, “Navigable waters have seemed to be a Federal responsibility since the 1840s in law, in bills that have passed the Congress. So in the early 1970s, the Clean Water Act was passed, and the EPA was formed. The Clean Water Act said the EPA will have jurisdiction over navigable waters. But with this outrageous waters of the United States rule, the EPA wants to now define ‘navigable waters’ as basically all the water in the country.

They want to say it is any water that can run into any water that can run into any water. I don’t know how many iterations of that there would be that can run into any water that eventually runs into navigable water. There is a case before the Supreme Court right now where the EPA is challenging a company in Minnesota based on navigable waters. The location they are challenging is 120 miles away, by no argument, from the nearest thing that anybody would truly consider a navigable water.”

Sen. Blunt added that, “In my State, anything that would meet the EPA definition of what could be the definition of their new sense of waters of the United States covers 99.7 percent of the State.”

On the other hand, Sen. Ben Cardin (D., Md.) provided this background on the issue yesterday: “It was for all those reasons that we passed the 1972 Clean Water Act. We understood the enforcement of the waters that were regulated under the 1972 Clean Water Act. It was based upon best science.

Science told us what we needed to do in order to have clean water—clean water for our environment, clean water for safe drinking water—and it was well understood until a Supreme Court decision. That decision in 2006, known as the Rapanos decision, was a 5-to-4 decision of the Supreme Court, which remanded the case, but it was a 4-to-4 decision on the merits of the case. Since that time, there has been uncertainty as to what bodies of water can be regulated under the Clean Water Act. So this was a situation caused by the ambiguity of the Supreme Court case. It is interesting that the decision on the merits was 4-to-4, as we are now debating whether we are going to have a full Supreme Court in order to make decisions that affect the clarity of law in this country.

“The Rapanos decision sent back to the lower courts a decision on how to decide this. Since that time, there has been uncertainty as to what bodies are legally regulated under the 1972 Clean Water Act. Remember, this was 2006. The easiest way to resolve this was for Congress to pass a law clarifying the Clean Water Act, but Congress has chosen not to do that. So the Obama administration has done what it should do, using its power to promulgate a regulation that would provide clarity as to which bodies of water are regulated. Guess what. They have done that in a way that is consistent with how the law was enforced prior to the Rapanos decision—without much complaint before the Rapanos decision. It basically goes back to best science and tells us logically what needs to be regulated. That is what this rule would do: Protect our clean water.”

And Sen. Richard Durbin (D, Il.) noted that, “Attempts to roll back the clean water rule will not only return us to a patchwork of water protections that make it difficult for businesses, farmers, and others to know whether water ways are covered by the law. It will also risk one of our greatest commodities that supports agriculture, recreation, tourism, and energy production.”

Separately on the Waters of the U.S. Rule, a news release yesterday from Sen. Heidi Heitkamp (D., N.D.) stated that, “[Sen. Heitkamp] pressed witnesses at a Senate hearing about the need for her bipartisan bill to do away with the Environmental Protection Agency’s (EPA) overbroad Waters of the U.S. rule.

“During a U.S. Senate hearing on the role of government regulators, Heitkamp underscored the need for Congressional legislative action to provide predictability to farmers and ranchers, like her bipartisan bill to fix the Waters of the U.S. rule. Heitkamp reinforced that to address the challenges with the Waters of the U.S. rule, Congress needs to legislate so that federal agencies have the direction they need to develop better regulations.

“Last year, Heitkamp helped introduce a strong and comprehensive bipartisan bill – which she worked with Republican and Democratic senators on since early 2014. Her bill offers a compromise fix by doing away with the harmful Waters of the U.S. rule and sending it back to the EPA for the agency to redo so it takes into account the concerns of farmers and ranchers.”

The judicial branch was also active on the Waters of the U.S. Rule yesterday.

Politico’s Morning Agriculture reported today that, “A federal appeals court stood by its decision that challenges to the Obama administration’s controversial water rule belong with it, rather than having to first go through district courts. The Cincinnati-based 6th Circuit Court of Appeals on Thursday denied petitions from states, industry groups and property rights activists opposing the Waters of the U.S. rule that asked that the court to rehear arguments on the question. Those groups argued that under the Clean Water Act, challenges to the rule must begin in district court. In February, a three-judge panel issued a splintered 2-1 opinion ruling that the challenges belong with it, although the concurring judge said he disagreed with the decision but felt bound by precedent. Opponents of the rule, also known as the Clean Water Rule, hoped that could open the door for a rehearing before the full court.”

The court’s decision from yesterday can be read here.

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Sen. Inhofe Notes Regulatory Concerns of Farmers, WOTUS Rule

Categories: Regulations

While discussing the U.S. Supreme Court vacancy on the Senate floor yesterday, Sen. James Inhofe (R., Okla.) noted that, “President Obama is not able to get his liberal agenda through Congress, he has turned to Executive action and to agency rulemaking to implement priorities. These regulations are actually making their way through our courts and are either going to be heard by the Supreme Court or have already been heard by the Supreme Court.”

He added that, “What we are saying is this: The President has a very liberal agenda on almost every social issue, every fiscal issue, every military issue. It is a very liberal agenda. So when the President can’t get things done through legislation, he then turns around and tries to do it through regulation.

“I will give an example. If you talk to the American Farm Bureau right now, they will tell you the greatest problem farmers and ranchers have—I know this because I am from the farm State of Oklahoma—is not anything in the Agriculture bill. It is the overregulation of the EPA. Of all the regulations that are damaging to farmers and ranchers in America, the one they single out as being the worst is the WOTUS rule; that is, the waters of the United States.

“Historically, it has always been in the jurisdiction of the States as to how to control and manage the waters of the United States, except in cases where it is navigable waters. Well, we understand that. We understand that is where the Federal Government should be involved. But 6 years ago there was a lot of legislation and one bill in particular that was offered in the House and the Senate that would take the word ‘navigable’ out. That being the case, that would mean all the waters in a jurisdiction would go from the States to the Federal Government, and we weren’t going to let that happen. But this is what is going on right now. Things they have tried to get passed through legislation and haven’t been able to do, they are trying to do through regulation.

“If the Supreme Court is split 4 to 4 in these two cases I just mentioned, the injunctions of the lower courts will stand until the underlying issues are fully litigated. That is what they are waiting for right now. The Court has said that until the litigation is cleared up, we are not going to act on this rule. Well, as you know, that is going to take a long time for that to happen.”

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Last Report: Personal Note; Ag Economy; Trade; and, Regulations

Personal Note

I remember the time in 2002 I tried to explain to my wife an idea I had about summarizing newspaper articles relating to farm policy issues for busy people at work who didn’t have time to read as much as they wanted to.

Now the time has come to stop writing the daily reports.

Thanks so much to the over 200 individuals who took time the past couple of weeks to share with me their appreciation for the reports; here are reflective examples of what these very thoughtful notes from readers said:

“Everyone always says ‘make sure you get the farm policy update’ because everyone knows it’s the best.”

You’ve been a must-read for thousands.”

“I’ve shared your site with dozens of people over the years, always saying ‘sign up for Farmpolicy.com. It is the very best source for ag news anywhere.’ This is one of the few places where information is gathered and shared without commentary.”

“Your willingness to provide this early-morning update day after day, without fail, has been a wonderful contribution.”

“I have marveled at the discipline and effort required to bring ‘farm policy’ to my east coast desk early in the day.”

“Your daily surveys are the best-written, most comprehensive, and most objective news source that I have seen for a long time.”

“In addition, your integrity in reporting is deeply appreciated. There is a lot that gets said in ag circles, and you screened out the chaff. Your accuracy in reporting was always highly valued as well. Only you could have provided that unique combination of an ag economist, an ag attorney, and a journalist. The ag community has richly benefited from your dedication and commitment to FarmPolicy.com.”

“Distilling the information from numerous sources, sites, and newspapers is an overwhelming task that you accomplished with great professionalism. What you provided was accurate, complete, and extremely valuable.”

And Rep. Adrian Smith (R., Neb.) tweeted yesterday: “Thank you to Keith Good for his years of ‪#ag reporting. Sad to see ‪@FarmPolicy end, but I wish him all the best in his new chapter.”

Thanks to all for reading FarmPolicy.com.

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Thursday Morning Update: Ag Economy; Trade; and, Regulations

Remember, FarmPolicy.com ends tomorrow.

Agricultural Economy

Adam Nagourney reported on the front page of today’s New York Times that, “Gov. Jerry Brown on Wednesday ordered mandatory water use reductions for the first time in California’s history, saying the state’s four-year drought had reached near-crisis proportions after a winter of record-low snowfalls.

“Mr. Brown, in an executive order, directed the State Water Resources Control Board to impose a 25 percent reduction on the state’s 400 local water supply agencies, which serve 90 percent of California residents, over the coming year. The agencies will be responsible for coming up with restrictions to cut back on water use and for monitoring compliance. State officials said the order would impose varying degrees of cutbacks on water use across the board — affecting homeowners, farms and other businesses, as well as the maintenance of cemeteries and golf courses.

“While the specifics of how this will be accomplished are being left to the water agencies, it is certain that Californians across the state will have to cut back on watering gardens and lawns — which soak up a vast amount of the water this state uses every day — as well as washing cars and even taking showers.”

Today’s article explained that, “Owners of large farms, who obtain their water from sources outside the local water agencies, will not fall under the 25 percent guideline. State officials noted that many farms had already seen a cutback in their water allocations because of the drought. In addition, the owners of large farms will be required, under the governor’s executive order, to offer detailed reports to state regulators about water use, ideally as a way to highlight incidents of water diversion or waste.

Because of this system, state officials said, they did not expect the executive order to result — at least in the immediate future — in an increase in farm or food prices.”

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Wednesday Update: Ag Economy; Policy; and, Regulations

Reminder: Only two FarmPolicy.com reports left.

Agricultural Economy

A news release yesterday from USDA’s National Agricultural Statistics Service (NASS) stated that, “For a second year in a row, U.S. growers are raising the bar on soybean acreage. Growers across the United States intend to plant an estimated record-high 84.6 million acres of soybeans in 2015, [related graph], according to the Prospective Plantings report released today by [NASS].”

Yesterday’s release added that, “NASS today also released the quarterly Grain Stocks report to provide estimates of on-farm and off-farm stocks as of March 1. Key findings in that report include:

“- Corn stocks totaled 7.74 billion bushels, up 11 percent from the same time last year. On-farm corn stocks were up 13 percent from a year ago, and off-farm stocks were up 7 percent.

“- Soybeans stored on farms totaled 1.33 billion bushels, up 34 percent from March 1, 2014. On-farm soybean stocks were up 60 percent from a year ago, while off-farm stocks were up 18 percent.”

University of Illinois agricultural economist Darrel Good indicated yesterday at the farmdoc daily blog (“USDA Stocks and Acreage Estimates Smaller than Expected for Soybeans and Larger than Expected for Corn”) that, “Compared to pre-report expectations, the March 1 soybean stocks and 2015 planting intentions estimates represent modestly friendly surprises. On the other hand, the stocks and planting intentions estimates represented modestly negative surprises for the corn market. Part of the negative corn price response to the estimates likely reflects inflated trend yield estimates for 2015 and perhaps an incorrect interpretation of the pace of feed and residual use during the first half of the marketing year. Attention will now turn to spring weather and planting progress.”

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Tuesday Morning Update: Policy; Ag Economy; Trade; Immigration; and, Regs

Note: FarmPolicy.com ends publication on Friday.

Policy Issues

An interview with House Ag Committee Ranking Member Collin Peterson (D., Minn.) aired on yesterday’s AgriTalk radio program with Mike Adams.

The interview, which focused on the Farm Bill, trade, regulations, and biotech issues, was recorded last week and was conducted before a group of Farm Bureau members from Missouri, Minnesota, Iowa, and Texas.

An unofficial FarmPolicy.com transcript of the AgriTalk interview is available here.

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AgriTalk Transcript: Senator Marco Rubio

Senator Marco Rubio (R., Fla) was a guest on Thursday’s AgriTalk radio program with Mike Adams, where the conversation focused on immigration, trade, and regulation.

This is an unofficial FarmPolicy.com transcript of their discussion.

Mr. Adams: Welcome back to AgriTalk here in Washington, D.C. Yesterday I had the opportunity to talk with Florida Senator Marco Rubio. We had an exchange back and forth, difference of opinion on Cuba. We also talked a number of ag issues. But I started off asking Senator Rubio does he have any plans, any announcements coming about possibly running for President.

I have to start off—I mean, you’ve got a great setting here, this is going to be on the radio—we keep a pretty good secret. We wouldn’t let it get out of this room. Do you want to make any announcements while you’re here?

Sen. Rubio: Yes, I do. I do. I saved a bunch of money by switching to Geico. [Laughter.] That’s actually not true, I’m still on State Farm, but I thought it was funny, you know. [Laughter.]

Mr. Adams: Be careful Brian Williams, in how you tell your stories now, okay? We don’t want you to get in trouble. Well, we’re so glad that you are with us. And let’s just talk for a little bit and then we’ll open it up to the audience. We just heard from Chairman Conaway his thoughts on how we can address the immigration issue. I know you’re very involved in this.

We look at it in this group, I think, two different ways. Obviously we want to get some kind of resolution nationally, but there’s also the ag labor component to this we’re trying to get resolved as well. How do we approach it? Does it have to be all or nothing or can it be piece by piece?

Sen. Rubio: Well, a couple points. First of all, it’s a critical issue with regards to workforce, and that’s true all over the country. Virtually, there’s no sector—there are some mechanized sectors in agriculture, but by and large agriculture is reliant upon labor. And I’ve actually met some of these folks, both in Florida and in other parts of the country, in South Carolina very recently, in a peach operation, that are dealing with labor problems.

We need a reliable system that allows us to bring to this country, on a seasonal or year-round basis, temporary workers who want to work in agriculture, but do not want to be here permanently—and those are millions of people. And there’s a recognition of that in this country. I think there is a broad recognition of that, that we need to address that. The problem is that it has been wrapped up in the broader issue of immigration, which is much more complex.

Now I would start by saying there’s a significant amount of people in this country illegally who quite frankly never want to be citizens, do not want to be permanent residents, they just want to work for nine months out of the year, or six months, or eight months, they want to go back home for a period of time, and they want to come back again next year when their labor is needed. But they’re afraid to leave because if they do, they’re going to have to sneak back in again next year, so they stay. Because again, we don’t have a cost effective program that works for every part of agriculture, and that has to be fixed.

I personally worked on negotiating the differences out there between different ag groups across the country, those who represent farm workers, on a program as part of the comprehensive approach. But the lesson of 2013 and our efforts is that you’re not going to be able to deal with something like immigration in one massive piece of legislation. And the primary reason for it is because there is the belief in this country, increasingly, rightfully so, that any massive piece of legislation will never follow through on the enforcement pieces.

And so if you do something to deal with ten million people that are here illegally, unless you enforce the law, you’re going to have ten million more a decade from now, and people aren’t prepared to do that. So I think the key to doing anything on immigration is to prove to the American people that we’re serious about enforcing our immigration laws, but as part of that, one of the things that would really relieve the pressure is to have a system that allows people to come here legally and work when their labor is necessary, and return back to their home country, and return again in the future if their labor is needed again, as it will be. And so I do have hope that we can deal with that.

And if we were only dealing with that issue, I think we could make tremendous progress. The problem has been that many advocates for immigration reform want it all or nothing, because they’re afraid that the minute agriculture gets what it wants, it will stop lobbying on behalf of immigration reform; the day technology companies get what they want, they’ll stop lobbying, and so forth, so they want to hold everyone together as a coalition, and that’s been the impediment.

Mr. Adams: The next topic—and I assume you and I are probably going to disagree on this—I just disagreed with Chairman Conaway, so…

Sen. Rubio: Yeah, okay.

Mr. Adams: Let’s talk Cuba. The President’s pushing to open up Cuba. Agriculture groups want to do more trade with Cuba. How do you feel about it?

Sen. Rubio: Well, first of all, there are agricultural goods that are allowed to be sold in Cuba, but they’re not allowed to do it on credit, and there’s a reason why: they don’t pay. And that’s a big problem. The second point I would make is the following. My interest in Cuba—this is my only interest in Cuba. I want Cubans to be free in a democracy.

I believe, in addition to my personal connection to the issue, I believe it is bad for the national security of the United States to have an anti-American dictatorship 90 miles from our shores. I’ll support any policy towards Cuba that achieves that goal.

I do not believe that a unilateral opening to Cuba will achieve that goal, for the following reason: there is no such thing as the Cuban economy. The entire Cuban economy is owned by the Cuban government, primarily the Cuban military, through a holding company by the name of GAESA, G-A-E-S-A. They own everything. They own the hotels, they own the farms, they own everything.

To do business with Cuba requires you to do business with the military dictatorship. And doing business with them is not a two-way street. It is they will pick and choose who they allow in, what they allow in on their terms, and they will not allow anything in that could provide any sort of democratic opening on the island, which is what I primarily care about in terms of the future of the Cuban people.

And that’s my concern, that you’re going to have a leadership transition, because the actuarial tables tell you that the current leaders, who are all over 80 something years of age, will not be there forever. And I want us to have leverage to be able to say if you want a better relationship with the United States, we need to see these things: we need to see independent political parties, we need to see the ability of people to organize themselves and speak openly, and have freedom of the press, and so forth. If you give these things away without any of those openings, what leverage do you have in the future for that?

And here’s one more point I would make. Every single piece of farmland in Cuba today, every major agricultural property in Cuba today was once owned by a private owner, including American companies. They were stolen. They were confiscated. There’s $7 billion worth of American claims on the island of Cuba that we were never compensated for.

If you allow the import—this is the reverse of perhaps what the farm bureaus around the country want—if you allow the import of agricultural goods from Cuba to the United States, you are allowing them to traffic in stolen goods. They stole someone’s farm, they stole someone’s equipment, and they’re now going to make a profit off what they stole without compensating, including American companies—United Fruit Company—but also individuals.

You know, my family comes from a farming background in Cuba. They weren’t landowners, they were sharecroppers. They grew tobacco. But that property today is completely in the control of the Cuban government. There’s no profit motive. That’s why Cuban cigars are no longer any good. But the point being that that’s a factor that no one’s talking about. There are $7 billion worth of claims that are completely uncompensated.

Imagine if someone came in and stole your farm and 15 years later, they are growing crops on that farm and selling it to the country you went to for a profit, using the things you…your land, your equipment, what you invested in. That’s another part of it we haven’t discussed.

Mr. Adams: In case you do have aspirations for another job somewhere down the line, what would you say to agriculture? Many in agriculture and other parts of the country not really familiar with you or your policies or what you would push for if you got that new job. What can you tell this group about your ag positions?

Sen. Rubio: Well, first of all, as I said, I have a family connection. My grandfather was the single greatest influence on my life growing up, and it all entailed…you know, he was one of 17 children. Was a labor program, I guess, that they were undergoing, but… [Laughter.]  He was the only one that couldn’t work on the [field]. He had polio when he was six years old, so he actually went out and learned how to read and write, and struggled because he was disabled from polio.

But nevertheless, Florida is an enormous agriculture state. People associate Florida with real estate, no income tax, and Walt Disney World. All are great—and beaches. But we have an enormous ag component. And it’s one that’s endangered by a number of things.

First of all, by unfair trade practices that we see, whether it’s dumping of tomatoes from Mexico or some of the other issues. But the other issue we’ve really begun to face is both environmental regulations from the EPA—we had a [numeric] nutrient content fight a year ago where they basically tried to come in and impose standards that would make the water even cleaner than what comes out of your tap, in some instances, on agriculture.

And the other threat we face is invasive species. And in particular we’re having a problem now—we’ve got a [canker] problem in Florida that almost wiped out the citrus industry, and now we have a greening problem that actually—the canker ruined the fruit, the greening destroys the trees.

And the problem with losing agriculture is when you lose agricultural land and it becomes developable now because it becomes the highest, best use, you can never get it back. Once someone builds a multifamily housing complex on a piece of agricultural land, you can never come back ten years later and turn it back into farming. And that’s a major problem. You lose the capacity to grow food and to feed your people.

We take that for granted in the United States. We have a lot of people in this country that, when you ask them where does food come from, they’ll say the supermarket. They don’t realize that someone had to grow it. And we take for granted that we have a plethora of food and that we have it in what’s basically still affordable in comparison to the rest of the world, although prices have gone up a little bit, but not necessarily because of agriculture’s fault. And we take that for granted. Food security is even more important than energy security in terms of the future of our country. And if you lose the capacity to feed your people, not to mention export and provide products to others, you lose a major component of your economy.

So what are the threats from government in that regard? The first, of course, is these environmental regulations. The second, for example, is the interpretation of existing law from regulatory agencies like the Waters of the United States issue that we’re trying to address in the budget.

And the third role government can play is with basic research. This greening issue, as I pointed out, is something that the University of Florida, through a program called [IFAS], has been doing round the clock research to try to fix. If we don’t fix that issue, it is not unforeseeable that in less than a decade we will have no Florida citrus left. That, to me, is unimaginable for a state so identified with oranges and grapefruits.

And last is I think it’s important for us to open up free and fair trade with allies and partners around the world. It has to be on terms that are fair. So I believe in the Trans-Pacific Partnership, but that means that we need to have a deal with Japan that allows us to sell beef and other products into their markets. I think it’s important for these deals. It’s good for us to have millions of people around the world that can afford to buy what we grow, millions of people in the consumer class.

But it has to be on terms that are fair to the American agriculture sector, because I can tell you many of our agricultural products have to compete against other nations that heavily subsidize their industries and have zero environmental or labor regulations over their head compared to ours. And if they can undercut our growers, wipe them out, put them out of business, they then control the global market and can charge us anything they want, and as I said, we lose the growing capacity.

Mr. Adams: See, he can talk ag. There we go. All right. [Applause.]

[End of recording.]

Sunday Update- Budget-Policy; Ag Economy; and, Regulations

Budget- Policy Issues

An update on Friday at the National Sustainable Agriculture Coalition (NSAC) Blog stated that, “This week the House and Senate Budget Committees each passed their Fiscal Year 2016 budget resolutions on party line votes.

“Each Committee’s resolution will now go to the floor of the House and Senate for consideration. This will likely take place next week with final passage targeted for the end of the week.”

The NSAC update explained that, “Budget resolutions provide the blue print for the appropriations process that will take place in the coming months. They set binding top line spending caps for the House and Senate Appropriations Committees.

“Budget resolutions may also include ‘budget reconciliation’ instructions, which instruct certain Committees to meet specific deficit-reduction targets through reductions in mandatory spending. Only the House Budget Committee’s version contains reconciliation instructions to the Agriculture Committee.”

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

Agricultural Economy

Reuters writer Christine Stebbins reported yesterday that, “Drought pressures will increase in California and western areas of the United States this spring even as the dry season begins, the government’s Climate Prediction Center said on Thursday.

“‘Periods of record warmth in the West and not enough precipitation during the rainy season cut short drought relief in California this winter and prospects for above-average temperatures this spring may make the situation worse,’ Jon Gottschalck, chief of the Operational Prediction Branch at the Climate Prediction Center, said in issuing its spring outlook.

“The center, a division of the National Oceanic and Atmospheric Administration, also said rivers in western New York and eastern New England have the greatest risk of spring flooding in part because of heavy snowpack coupled with possible spring rain.”

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

Budget- Policy Issues

Jonathan Weisman reported in today’s New York Times that, “House Republicans called it streamlining, empowering states or ‘achieving sustainability.’ They couched deep spending reductions in any number of gauzy euphemisms.

“What they would not do on Tuesday was call their budget plan, which slashes spending by $5.5 trillion over 10 years, a ‘cut.’

The 10-year blueprint for taxes and spending they formally unveiled would balance the federal budget, even promising a surplus by 2024, but only with the sort of sleights of hand that Republicans have so often derided.”

The Times article added that, “The House Budget Committee will formally draft the budget on Wednesday, as Senate Republicans unveil their counteroffer. Like the House version, the Senate’s will balance in 10 years, aides to Republicans senators said. Like the House, the Senate will include language to help lawmakers repeal or reshape the Affordable Care Act this year. How the two chambers resolve their differences could be a central drama in Washington throughout the spring.”

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

Policy, Budget Issues

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

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

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

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

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

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

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

Crop Insurance- GAO Report

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

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

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

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

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

Policy Issues, Budget Baselines, USDA Reports

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

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

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

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

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

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

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Sunday Update: Iowa Ag Summit; Policy; Budget; Trade; and, Regs

Iowa Ag Summit

A summary and highlights of Saturday’s Iowa Ag Summit are available here, at FarmPolicy.com Online.

 

Policy Issues

In other news, Lydia Wheeler reported on Friday at The Hill Online that, “The U.S. Department of Agriculture is giving schools $5.5 million in training grants, in addition to the $25 million being allocated this year for new kitchen equipment, to help districts prepare healthier meals.

“‘Our kids today are growing up in a very competitive economy and in this competitive economy it’s going to be very important for them and their country to be on top of their game,’ Secretary of Agriculture Tom Vilsack said Friday.”

Beena Raghavendran reported on Saturday at the Minneapolis Star-Tribune Online that, “In Moorhead, to qualify for government cash assistance, residents must have lower incomes than people living right next door in Fargo, N.D.

“This discrepancy upsets U.S. Rep. Collin Peterson, a Democrat whose Seventh Congressional District includes Moorhead. Some Minnesota residents make slightly too much to receive benefits by Minnesota law while their counterparts making the same income across the state line are getting help. It’s a problem echoed across the country because states set their own cash benefit standards.

“‘We have to work on how we treat different people differently in different parts of the country,’ Peterson said.”

The article added that, “The House Agriculture Committee — where Peterson is the highest ranking Democrat — just began its review of the Supplemental Nutrition Assistance Program, or SNAP, formerly known as the food stamp program, to address a glaring problem: Though unemployment has fallen since the recession, numbers of food stamp recipients have remained constant.

“Some Republicans wonder whether the program is increasing its recipients’ dependency on welfare.

Peterson understands the concern, but he doesn’t think the food stamp program should be touched — at least for now.”

The article indicated that, “‘I don’t think we should do anything because we did the farm bill and it’s a five-year bill and they [Republicans] had their chance and it didn’t get done,’ Peterson said.

“The committee’s GOP Chairman Rep. Michael Conaway, of Texas, said there may be a legislative proposal to tackle food stamp inconsistencies.

“‘What we don’t want is for this program to hold people back from achieving their potential,’ he said.”

Julie Harker reported late last week at Brownfield that, “Missouri Attorney General Chris Koster and plaintiffs from five other states have filed an appeal in the case of the California egg legislation they are fighting. Last October, a district judge in California tossed out their lawsuit against California’s Proposition Two, which requires eggs produced in California and elsewhere to meet that state’s new enlarged-cage standards for egg laying hens. Koster tells Brownfield Ag News, ‘The egg case is a very important case. A lot of people have made fun of us for bringing this case and yet, increasingly as egg prices are now soaring because of the acts of the California legislature, they are recognizing that we were right to bring this case.’”

Meanwhile, The Washington Post editorial board indicated on Saturday that, “Farmers and ranchers have often argued they are not responsible for the rise of antibiotic resistance and have balked at change. The McDonald’s decision is certain to get their attention and cause change by market incentives. Also, as chicken producers adapt and learn how to keep their flocks healthy without the routine use of antibiotics, the know-how they develop may spread. Of course, the McDonald’s decision is good marketing, too — consumers say they want it. More power to the marketplace.

“This is the latest in a string of developments that suggest, at last, a more serious approach to the problem of antibiotic resistance, which the Centers for Disease Control and Prevention say leads to 2 million illnesses and 23,000 deaths a year in this country alone. The Food and Drug Administration has asked antibiotic manufacturers to stop selling the drugs for growth promotion in farm animals (although the FDA would permit continued use for disease prevention) and is giving veterinarians more control. Meanwhile, President Obama has proposed to double funding for combating antibiotic resistance, and the White House has mapped out an ambitious strategy. Bacteria have been evolving and adapting for many years, so it is encouraging to see the government and private sector doing more to address a major public health threat.”

 

Budget Issues

A recent Congressional Budget Office (CBO) news item indicated that the agency is set to release updated baseline projections on Monday.

A recap of January’s CBO baseline is available here.

Also, Jesse Byrnes reported on Sunday at The Hill Online that, “Senate Majority Leader Mitch McConnell (R-Ky.) on Sunday vowed that Republicans would figure out a way to handle the nation’s debt ceiling in order to avoid a government shutdown.

“‘The debt ceiling will be handled over a period of months,’ he said on CBS’s ‘Face the Nation’ when asked if Republicans would vote to lift the debt ceiling. ‘The secretary of the Treasury has a number of what we call ‘tools in his toolbox,’’ he added.”

 

Trade

In trade related news, an update on Saturday at The Japan Times stated that, “Japan and the United States failed to bridge the gap over tariff issues related to agricultural and auto trade as they wrapped up working-level bilateral talks associated with Trans-Pacific Partnership multilateral free trade negotiations on Friday.

Hiroshi Oe, Japan’s deputy chief TPP negotiator, told reporters after the two-day meeting that there still remain some thorny issues.”

The article added that, “Of the unresolved issues, Japan and the United States will hold talks on agricultural tariffs on the sidelines of a meeting of chief negotiators from all 12 members in the TPP talks set for Monday through Sunday in Hawaii.”

Vicki Needham reported on Sunday at The Hill Online that, “Labor unions and other groups opposed to free-trade policies are ramping up a spring offensive against the White House and congressional Republicans with new trade legislation set to emerge in the coming weeks.

“The AFL-CIO along with other groups this week trumpeted how trade promotion authority (TPA) will rubber stamp agreements like the Trans-Pacific Partnership (TPP) that they say would hurt American workers by leading to job and wage losses.

“Hundreds of members from the various groups canvassed Capitol Hill, bringing their anti-fast-track message to more than 100 congressional offices. It’s just the latest push from the left to stop the Obama administration’s push for TPA or fast-track, which would prevent trade deals from being amended by Congress.”

 

Regulations

A news release Friday from Rep. Randy Neugebauer (R., Tex.), Vice Chairman of the House Agriculture Committee, indicated that he “….introduced H.R. 1267 this week, a bill that would make it easier for farmers, custom harvesters, and agricultural producers to safely transport the fuel they need for a day of field work. Rep. Collin Peterson (D-MN), Ranking Member of the House Agriculture Committee, joined Neugebauer in introducing the bill. In the Senate, a companion bill was introduced by Senator Pat Roberts (R-KS), Chairman of the Senate Agriculture Committee, Senator Heidi Heitkamp (D-ND), and Senator Jerry Moran (R-KS).”

Keith Good