FarmPolicy

July 28, 2014

Ag Economy; Trade Hearing; Policy; and, Regulations

Agricultural Economy

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included several observations with respect to the U.S. agricultural economy.

The Chicago District indicated that, “The District’s corn and soybean crops made up ground after a late start to planting as favorable weather helped plants emerge more quickly than the five-year average. The consensus among contacts was that the corn and soybean crops were in excellent shape, but were unlikely to set records when harvested because of the late plantingsHog prices moved higher as disease affected supplies.”

The St. Louis District noted that, “Over 90 percent of the District’s corn, cotton, rice, sorghum, and soybean crops were rated in fair or better condition.”

The Kansas City District pointed out that, “The corn and soybean crops were in good condition overall, and improved growing conditions led to a drop in prices for both crops. Cattle prices continued to rise, but feeder cattle prices have recently increased much faster than fed cattle prices and narrowed margins for feedlot operators. The cumulative effect of reduced piglet numbers due to the swine virus and strong export demand for pork supported further gains in hog prices, even though pork production forecasts were raised due to heavier dressed weights and higher than expected slaughter in the second quarter.”

And, the Dallas District added that, “Widespread rains greatly improved prospects for row crops, especially cotton, but came too late to aid the Texas wheat crop, which is expected to be down 20 percent this year.”

A summary of all of the ag related notes from yesterday’s Fed report can be found here, at FarmPolicy Online.

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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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Farm Bill; Appropriations; CFTC; Ag Economy; Regs; and, Biofuels

Farm Bill, Executive Branch Bee Initiative, Labeling Issue

Bradley Lubben and James Pease indicated recently at Choices Magazine Online (“Conservation and the Agricultural Act of 2014”) that, “While overall conservation spending is projected to decline from baseline levels under the new Act [The Agricultural Act of 2014 (the Act), or commonly the 2014 Farm Bill], the allocation of spending among conservation programs provides insights into the changing focus of conservation efforts. Analysis from the U.S. Department of Agriculture (USDA) Economic Research Service illustrates the changing conservation priorities since the 1996 Farm Bill (USDA Economic Research Service, 2014). Figure 1 shows the share of conservation spending by 2014 Farm Bill major program area (and their predecessors). Reduced spending for the conservation title primarily comes from reductions in CRP funding resulting from a lower enrollment acreage cap. While the CRP has been the largest single component of conservation spending since its creation in 1985, working lands programs (EQIP and CSP) are projected to comprise the majority of spending over the fiscal and program years 2014-2018. Working lands program funding is projected to continue its growth throughout 2014-2018, but at slower rates than the pre-Act baseline. And ACEP easement programs are expected to receive less funding under the 2014 Farm Bill than their predecessor programs received under the 2008 Farm Bill.

“Reduced conservation program funding could reduce conservation efforts nationally, although the extension of conservation compliance requirements to crop insurance program participants should expand the requirements for maintaining at least minimal conservation practices on agricultural land across the country.”

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Ag Economy; Appropriations; Policy Issues; Senate Hearing; and, Political Notes

Agricultural Economy

Reuters writer Lucia Mutikani reported yesterday that, “U.S. consumer prices recorded their largest increase in more than a year in May as costs for a range of goods and services rose, likely easing the Federal Reserve’s concerns that inflation was running too low.

“The Labor Department said on Tuesday its Consumer Price Index increased 0.4 percent last month, with food prices posting their biggest rise since August 2011.”

The article noted that, “Food prices increased 0.5 percent in May, the fifth consecutive monthly increase.”

More specifically, the CPI report indicated that, “The index for meats, poultry, fish, and eggs rose 1.4 percent in May after a 1.5 percent increase in April, with virtually all its major components increasing.”

Bloomberg writer Megan Durisin reported yesterday that, “U.S. ground-beef prices are up 76 percent since 2009 to the highest on record, after a seven-year decline in the herd left the fewest cattle in at least six decades, government data show. Meat costs are rising faster than any other food group, eroding profit margins at Hormel Foods Corp. and forcing Costco Wholesale Corp. and Chipotle Mexican Grill Inc. to raise prices.

Supply probably will remain tight. It can take three years to expand the herd, and a prolonged drought in Texas, the top producer, parched pastures needed to raise young animals. The government says the U.S. will become a net beef importer in 2015. Cattle futures already up 22 percent in the past year in Chicago may rally 8.3 percent to $1.578 a pound by the end of December, a Bloomberg survey of five analysts showed.”

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Farm Bill- Policy Issues; Ag Economy; CFTC; and, Political Notes

Farm Bill- Policy Issues

Justin Sink reported yesterday at The Hill Online that, “First lady Michelle Obama on Monday blasted back at critics of her school lunch program, arguing parents should ensure their children eat healthy meals.

“Obama said parents and school leaders can’t let children make the call to eat pizza and burgers for lunch every day.

“‘If I let my kids dictate what we have for dinner every day, it would be French fries, chips and candy, but we don’t run our households like that, and we can’t run our schools like that,’ the first lady said in an interview with MSN.”

Yesterday’s update noted that, “House Republicans are expected to hold a floor vote this week on a bill that would waive tougher nutritional standards on school lunches if the school shows it has operated at a net loss over six months.”

The White House has backed a compromise agreement adopted by the Senate Appropriations Committee. Under that deal, tougher requirements on sodium levels would not be implemented, although requirements for schools to offer fruits and vegetables would be kept,” the Hill article said.

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Ag Appropriations; EPA Water Hearing; Trade Hearing; Ag Economy

Agricultural Appropriations- House Action

Yesterday, the House took up the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2015 (H.R. 4800). Although a final vote on the measure has yet to take place, several amendments to the spending bill were considered on the floor yesterday.

A chronological recap of yesterday’s House activity is available here, while a list of amendments that lawmakers considered can be found here.

More specifically, Cristina Marcos reported yesterday at The Hill Online that, “The House on Wednesday adopted a proposal from Rep. Barbara Lee (D-Calif.) to boost funding for school breakfast equipment grants.

Approved by voice vote, Lee’s amendment to the 2015 Agriculture appropriations bill would increase funding for the school breakfast grant program by $8.1 million by offsetting the same amount from the Agriculture secretary’s administrative accounts. The amendment would bring total funding for school breakfast equipment grants to $35 million, which aligns with the Obama administration budget request.”

The Hill update noted that, “The House is considering the 2015 Agriculture appropriations bill under an open rule, which allows members to offer an unlimited number of amendments. Passage is not expected until Thursday.”

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Rep. Smith- Nebraska Exports Benefit World Consumers

In response to questions from Congressman Adrian Smith (R-NE), panelists at a Ways and Means Trade Subcommittee hearing discuss how protectionist trade policies hurt consumers.

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Ag Appropriations; Ag Economy; Regs; Water Bill; and, Political Notes

Agricultural Appropriations- Policy Issues

Today the House will consider the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2015 (H.R. 4800), which will be debated under a “Modified Open Rule.” (“The rule provides for one hour of general debate and makes in order any amendment offered that complies with the House rules. Additionally, the Rule provides for 10 minutes of debate per amendment equally divided between the proponent and an opponent and up to 10 pro forma amendments for the purpose of debate offered by the Chair and Ranking Member or their designee.”)

Bloomberg writers Alan Bjerga and Derek Wallbank reported yesterday that, “House Republicans today will try to roll back school-lunch nutrition requirements — passed in 2010 with the backing of First Lady Michelle Obama — saying the rules bust local budgets and micromanage what children eat.

The vote, over a provision in the U.S. agriculture spending bill, is a proxy for a larger debate between Republicans, who call the rules a massive government overreach, and Democrats, who say the opposing party is trying to protect the interests of big food producers.”

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House Legislative Agenda; Farm Bill; Biotech; and, the Ag Economy

House Legislative Agenda- Ag Appropriations, CFTC

Matt Fuller reported on Friday at Roll Call Online that, “Majority Leader Eric Cantor laid out a busy legislative agenda for the remainder of June in a memo to House Republicans sent Friday, scheduling floor time to address issues at the Department of Veterans Affairs, three appropriations bills, three tax extender bills, and legislation to make gas and other energy prices cheaper. Notably absent from the agenda: any mention of immigration, an unemployment extension or the expiring Export-Import Bank.”

Cantor’s memo indicated that Agriculture was one of the three appropriations bills that would be considered.

More specifically, the Majority Leader’s schedule for this week noted that the Agriculture Appropriations measure was listed under the heading, “Tuesday, June 10th and the Balance of the Week;” and, a notice from the House Rules Committee indicated that the Agriculture Appropriations bill would be addressed at a hearing scheduled for Tuesday afternoon.

Recall that the Appropriations Committee passed the fiscal year 2015 Agriculture Appropriations bill on May 29, and that debate on the measure centered around controversial nutrition provisions regarding the allowance of “school districts a one-year waiver to opt out of improved nutrition standards promoted by Michelle Obama.”

Interestingly, as this appropriations issue potentially moves to the House floor this week, the Senate Agriculture Committee will also be holding a hearing Thursday titled, “A National Priority: The Importance of Child Nutrition Programs to our Nation’s Health, Economy and National Security.”

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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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Ag Economy; Policy Issues; CFTC; and, Political Notes

Agricultural Economy

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions.  Commonly referred to as the “Beige Book,” the report included several observations with respect to the U.S. agricultural economy.

The Minneapolis District indicated that, “Hog producers continued to lose large numbers of animals to a virus, pushing up prices for pork, as well as poultry. Cattle producers enjoyed record beef prices, as overseas demand grew and efforts to rebuild the U.S. herd kept cattle from going to slaughter.”

The Kansas City District noted that, “Profit margins for livestock operators improved further as low cattle and hog supplies pushed prices higher and feed costs remained flat.”

And the San Francisco District added that, “In general, dairy operations benefited from low feed costs. Pork production remained weak as a fatal virus swept through pig farms in some areas.”

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Appropriations- Nutrition; Ag Economy; Farm Bill; Biofuels; Regs; and, Immigration

Appropriations- Nutrition Issues

The House Appropriations Committee will markup the FY15 Agriculture spending bill this morning, the bill is available here, while the Committee draft report can be found here.

In part, the draft report states that, “The Committee is concerned about the challenges and costs that local schools face in implementing the various regulations from the Healthy, Hunger-Free Kids Act of 2010. Schools from across the Nation have expressed concern with increased food costs and plate waste coupled with decreased participation in the National School Lunch Program (NSLP), all of which is resulting in at least half of all school food authorities to experience a decline in revenue. A February 27, 2014, GAO report found that student participation in the NSLP declined by 1.2 million students from school year 2010–11 through school year 2012–13. Additional meal requirements are scheduled to be implemented in the 2014–15 school year as well as the ‘Smart Snacks in School’ interim final rule.

“To address the concerns of local schools, the FY 2014 conference report directed the Secretary to establish a waiver process for schools incurring costs to provide more time to comply with some of these regulations. On March 14, 2014, the Secretary responded he did not have the statutory authority to grant such waivers. Therefore, the Committee includes bill language that provides schools with flexibility by allowing schools experiencing a financial loss for at least a six-month period to seek a waiver from compliance with the final regulations. The Committee directs USDA to implement this provision in a timely and streamlined manner. Schools receiving a waiver under this provision shall, at a minimum, implement the nutrition standards in effect prior to the final rule issued on January 26, 2012. The bill language does not provide for a change in reimbursement rates and only applies to the 2014–15 school year.”

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Appropriations; Biofuels; Biotech; Immigration; CFTC; Tax Extenders; Data; and, the Ag Economy

Appropriations- Nutrition, and Conservation

Tom Hamburger reported in today’s Washington Post that, “First lady Michelle Obama is set to take an unusual, high-profile step Tuesday into the center of a legislative battle by delivering White House remarks taking issue with makers of frozen pizzas and french fries and other companies seeking to scale back school lunch standards.

“Obama is scheduled to speak out against a House measure, backed by Republicans and pushed by the food industry and some school officials, that would allow some districts to opt out of federal mandates passed in 2010 to reduce sodium and increase whole grains, fresh fruits and vegetables in school lunches. White House aides say she will announce the launch of a campaign-style push to fight the legislation.

“The effort fits with the spirit of Obama’s ‘Let’s Move’ campaign and other initiatives in which she has advocated for healthy eating and a reduction of obesity. Until now, however, she has largely shied away from direct confrontations with lawmakers and industry groups.”

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Appropriations; WRDA; Policy Issues; Ag Economy; Biotech; and, Climate

Agriculture Appropriations- House

Erik Wasson reported yesterday at The Hill Online that, “The House on Tuesday moved forward with legislation aimed at exempting some schools from lunch nutrition rules that have been a part of first lady Michelle Obama’s anti-childhood obesity initiative.

“An Appropriations subpanel approved 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.

“Subcommittee Chairman Robert Aderholt (R-Ala.) said the temporary waivers are needed because some school districts are losing too much money and need more time to adjust to the requirement. He said a big problem is that students are refusing to eat the healthy foods.”

To listen to remarks on this issue from Chairman Aderholt at yesterday’s markup, just click here (MP3- 1:43).

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Ag Economy; Farm Bill; Tax Extenders; WRDA; Transportation Bill; and, Organics

Agricultural Economy- Fed Districts Note Land Values Soften

Jacob Bunge reported in today’s Wall Street Journal that, “Farmland values fell in the first quarter in much of the Midwest, the latest sign of a downturn in the market after a yearslong boom fueled by rising commodity prices, according to Federal Reserve reports on Thursday.

“Average prices for agricultural land in the Federal Reserve Bank of St. Louis’s district, which includes parts of Illinois, Indiana and Missouri, fell 6% in the first quarter from the prior quarter, the bank said [related graph].”

Mr. Bunge explained that, “Prices for nonirrigated farmland in the Kansas City Fed district, which includes Kansas and Nebraska, declined 1.4% over the same period. Meanwhile, the Chicago Fed reported a 1% quarter-to-quarter decline, the first in five years for a district that includes Iowa, Michigan and parts of Illinois and Indiana [related graph].

“The reports indicate the U.S. farmland market has softened further, after cooling last year as U.S. grain and soybean prices fell sharply amid large harvests. Farmers produced the biggest corn crop ever last autumn, just one year after the nation’s worst drought in decades drove prices for the grain to record highs. Corn futures prices at the Chicago Board of Trade have fallen 24% over the past 12 months.”

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Ag Economy; Transportation Bill; Tax Extenders; Farm Bill; CFTC; Immigration; and, WRDA

Agricultural Economy

Steve Everly reported earlier this week at the Kansas City Star Online that, “It’s shaping up as another summer of discontent for Gary Millershaski.

The Kansas wheat farmer is in his third year of drought and things are not looking good this time around for his 3,500 acres of wheat. The question is not if but how much his harvest is going to get slammed. By one estimate, his harvest will be about half of his best ones.”

Mr. Everly pointed out that, “His concerns were confirmed Friday when the federal government said it expects the Kansas winter wheat crop will be the worst since 1996.”

Daniel O’Brien, extension agricultural economist for Kansas State University, calculates this year’s winter wheat crop could bring in $900 million less compared with good years. That figure doesn’t include any proceeds from crop insurance.”

The article added that, “More than half of Kansas is currently classified as being in a drought.”

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