The report provided this brief overview of how agriculture fits into the rest of the U.S. economy, which also has inherent political ramifications: “In the 1920s, farm households accounted for more than 25 percent of the U.S. workforce and generated approximately 8 percent of gross domestic product (GDP). Today they account for only 1.6 percent of the work force and generate approximately 1 percent of GDP. Over the same period, the rural share of the population has fallen far less, from 49 percent to 19 percent, suggesting that rural areas are less dependent on farming’s contribution to the rural economy (Table 8-1) . The agricultural sector is still vital to our country, but because of growth in other sectors of the economy and rapid gains in agricultural productivity that have lowered the relative prices of agricultural products, it has become a smaller share of the U.S. economy.”
In reference to U.S. farm policy the report indicated that, “Highly volatile agricultural commodity prices can create significant income risk for farmers. At the same time, the current farm safety net is inefficient and unfair, creating distortions in production and crowding out market-based risk management options.”
“Adding provisions that make lands that have not previously been used to grow crops ineligible for crop insurance or other Federal benefits would help protect the nation’s prairies and forests from being converted into marginal cropland,” the report added.
Also, the report noted that, “For example, the increasing reliance of farm families on income earned from sources other than their farms and a shift toward market-oriented farm policies have made farms and commodity markets less vulnerable to adverse price changes than before. These changes imply that moving away from traditional commodity support programs would have a much smaller impact on farm household income than in previous decades. Nonetheless, substantial government support of agriculture remains.”
And, the report also pointed out that, “One-third of beginning farmers are over age 55, indicating that many farmers move into agriculture only after retiring from a different career.”
Budget: House Proposal, Senate Proposal- Farm Bill Implications
House Agriculture Committee Chairman Frank Lucas (R., Okla.) and Ranking Member Collin Peterson (D., Minn.) were guests on yesterday’s AgriTalk radio program with Mike Adams where both lawmakers discussed budget and policy issues.
Chairman Lucas indicated (FarmPolicy.com transcript) that, “Now, if you look at the ag side of the House [Budget Committee] proposal—and I’m more familiar with that than the Senate side—basically they propose somewhere in the range of about $30 billion in savings in what I would define as the non-nutrition programs. They actually have substantially higher savings proposed on the nutrition side.
“What I’m telling people is, because we need to write, as you well know, Mike, as many times as we’ve discussed it, a new comprehensive five-year farm bill, the House budget I view as guidance, and we’ll take what they propose very thoughtfully in place, but we’ll have to craft a comprehensive balanced bill that provides a safety net that will work that a majority of the membership in both bodies will pass.”
Chairman Lucas explained that, “There will be areas where we will achieve more savings than anyone can imagine possible, and there will be areas where it’s not possible to do some of the things discussed. But here, too, the Budget Committee gave us a number, not a long list of instructions. That’s the key, Mike. Let the Ag Committee, that understands agriculture and rural America, write the language. They gave us a number, and we’re going to do our best to meet it. But they didn’t give us instructions. My heartbeat was a little bit more consistent after I saw that.”
In part, Rep. Peterson discussed food safety issues, the sequester and the Continuing Resolution (CR) and pointed out that, “What needs to be done is the agencies and the military need to be given flexibility. One of the problems with the sequester is that it says that you have to take each line item and reduce it equally. And in agriculture, for example, that caused a problem because the meat inspectors, for example, it’s 87% salaries. They’d already made significant reductions in administrative costs through cuts that we’d made before and they didn’t have, really, any way to avoid it, so they were talking about furloughing meat inspectors, shutting down meat plants potentially, and so forth.
“If the Secretary had flexibility so he could reduce his entire department by a percent and could decide how to do it, then he would have been able to keep the meat inspectors on the line and make cuts other places. So I think at the end of the day if we can get this CR worked out, I think you’re going to see flexibility in there, and that’s probably the best you’re going to get, and we’ll see how the rest of this plays out.”
March 13, from Rep. Adrian Smith (R., Neb.)- “[Rep. Smith] participated in a House Ways and Means Subcommittee on Trade hearing on U.S. — India relations on March 13, 2013. During the hearing, Smith noted agricultural exporters in Nebraska’s Third District experience tariff and non-tariff barriers to trade in India. Smith asked Allen F. Johnson, who served as Chief Agricultural Negotiator in the Office of the United States Trade Representative from 2001 to 2005, to explain these barriers.”
Kerry Young reported yesterday at Roll Call Online that, “House appropriators are proposing a final fiscal 2013 spending package that would effectively cap federal operating expenses at $982 billion, while giving military and veterans programs new flexibility to cushion the effects of the sequester’s automatic cuts.
“The House is expected to vote Thursday on the measure unveiled Monday, which combines Defense and Military Construction-VA bills with a stopgap continuing resolution covering most of the rest of the federal agencies.”
The article noted that, “Although Senate Democrats still may take a different approach with the CR by adding in separate measures beyond defense, neither side appears to be eager to stir a confrontation by doing much more about the sequester or potentially creating a new shutdown threat. The president and Senate Minority Leader Mitch McConnell, R-Ky., were among those who last week predicted new fiscal 2013 appropriations would be cleared before the current six-month fiscal 2013 continuing resolution (PL 112-175) expires March 27.”
Zachary A. Goldfarb reported in Saturday’s Washington Post that, “President Obamaacknowledged Friday that deep federal budget cuts are here with no end in sight, an outcome that he warned would harm the economy but said he lacked the power to stop.
“A final attempt to find common ground with congressional leaders at a White House meeting proved fruitless. The president continued to press for higher taxes as part of a deal, and Republicans continued to refuse — clearing the way for $85 billion in cuts this fiscal year and $1.2 trillion over the next decade.
“The reductions, which Obama formally ordered late Friday, are likely to remain in place for the foreseeable future. There had been speculation that they might be adjusted later this month, when lawmakers must agree on a new deal to fund the government or risk a shutdown. But Obama made clear Friday that he would seek to avoid a shutdown even if that means allowing the across-the-board cuts, known as the sequester, to continue.”
Alan K. Ota reported yesterday at Roll Call Online that, “The Senate is expected to defeat Thursday competing Democratic and Republican alternatives to the $85.3 billion in automatic spending cuts scheduled to begin Friday.
“Majority Leader Harry Reid, D-Nev., proposes to replace the percentage cuts imposed by a provision of the 2011 debt limit agreement with a package of revenue increases and alternative savings [Congressional Budget Office score of this plan available here, while a more detailed discussion of the specific agricultural provisions of this package from the National Sustainable Agriculture Coalition (NSAC) can be found here].
“Senate Republicans settled late Wednesday on a sequester substitute that would give President Barack Obama until March 15 to send Congress an alternative package of targeted spending cuts. Lawmakers could block the president’s plan only by adopting within seven days a resolution of disapproval that would require Obama’s signature or the support of a veto-proof majority.”
The NSAC noted yesterday that, “Unlike the Democratic plan, the GOP plan would not address the Farm Bill.”
DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “The Agriculture Department’s Food Safety and Inspection Service will have to furlough meat, poultry and egg product inspectors if sequestration goes into effect, U.S. Agriculture Secretary Tom Vilsack wrote the American Meat Institute on Tuesday. The National Cattlemen’s Beef Association also raised concerns about the furlough.
“AMI President and CEO J. Patrick Boylehad written Vilsack and President Barack Obama that USDA has a ‘statutory obligation’ to keep FSIS inspectors on the job.”
DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “While possible sequestration cuts could begin as soon as March 1, USDA is still examining the possible effects on farm programs, a senior USDA official said Tuesday.
“Michael Scuse, the department’s undersecretary for Farm and Foreign Agricultural Services, spoke at the crop insurance industry’s annual meeting near Palm Springs, Calif. During the question-and-answer session, DTN asked Scuse about how farmers would be affected by possible cuts to commodity and conservation programs.
“‘We still have all of the attorneys at USDA looking at all of the programs and how they will in fact be affected if the sequester does kick in on March 1,’ Scuse said.”
The DTN update noted that, “Responding in a statement, AMI President J. Patrick Boyle wrote Agriculture Secretary Tom Vilsack ‘reminding him of USDA’s legal obligations to provide meat inspection even under sequestration.’
“As AMI stated, USDA also said that production will shut down for that time period, impacting approximately 6,290 establishments nationwide and costing roughly over $10 billion in production losses. USDA further told reporters that industry workers would experience over $400 million in lost wages and that consumers would experience limited meat and poultry supplies and potentially higher prices.
“‘We agree with the assessment that furloughing inspectors would have a profound, indeed devastating, effect on meat and poultry companies, their employees, and consumers, not to mention the producers who raise the cattle, hogs, lamb, and poultry processed in those facilities,’ Boyle said. ‘AMI respectfully disagrees with the Department’s assertion is that, in the event of sequestration, the furloughs referenced are necessary and legal. The Federal Meat Inspection Act and the Poultry Products Inspection Act (the Acts) impose many obligations on the inspected industry, which we strive to meet. Those Acts, also however, impose an obligation on the Department – to provide inspection services.’”
Purdue University Agricultural Economist Chris Hurt noted yesterday at the farmdoc daily blog (“Where Have All the Beef Cows Gone?”) that, “Cattle numbers are down again, to their lowest level since 1952, according to USDA’s recent inventory count. Beef cow numbers are at their lowest level since 1962 as the devastating impacts of the 2012 drought continues the longer-term decline. Beef cow numbers were down three percent in 2012 and 11 percent since 2007. The drivers have been high feed and forage prices, persistent drought in the Southern Plains, and of course the widespread Midwestern drought of 2012.”
Dr. Hurt added that, “What will it take to turn the herd decline around? The answeris more rain, more crop production, and more pasture and forage production. Larger crop and forage production would increase availability and lower prices of these critical feedstuffs. Given the small size of the calf crop, this would bolster calf prices. A second condition beef producers would like to see before expanding is some assurance that feed prices will have an overall moderation in coming years, not just a one year decrease.”
After additional analysis, yesterday’s farmdoc update pointed out that, “If crop and forage production returns to near normal, the cattle industry is poised for multiple years of favorable returns and expansion. However, everyone watching the ‘Drought Monitor’ knows that much of the country has not yet returned to normal weather conditions. Beef cattle producers will be poised to expand when weather conditions improve. Unfortunately for the beef industry, both poultry and pork producers are waiting at the start line as well. Those industries can expand production much more quickly and will extract market share from beef during the period from late 2013 to 2016.”
A news release yesterday from USDA’s Farm Service Agency (FSA) indicated that, “[USDA- FSA] Administrator Juan Garcia today announced that beginning Feb. 5, USDA will issue payments to dairy farmers enrolled in the Milk Income Loss Contract (MILC) program for the September 2012 marketings. The American Taxpayer Relief Act of 2012 extended the authorization of the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill) through 2013 for many programs administered by FSA, including MILC. The 2008 Farm Bill extension provides for a continuation of the MILC program through Sept. 30, 2013.”
The release added that, “The payment rate for September 2012 is approximately $0.59 per hundredweight. The payment rate for October 2012 marketings is approximately $0.02 per hundredweight. The payment rate for November 2012 marketings is zero.”
A recent editorial at Hoard’s Dairyman Online noted that, “As far as dairy is concerned, 2013 will be much of the same with renewal of the MILC program (Milk Income Loss Contract), Dairy Export Incentive Program (DEIP) and dairy product price supports. Unfortunately, DEIP and the dairy price support program represent outdated safety net initiatives that offer no peace of mind for dairy producers nor does it account for the escalating price of feed. That being the case, neither will generate stability under current market conditions. While MILC was renewed with a $7.35 ration adjuster at 45 percent of production, it too offers no projected support based on current futures contracts. Plus, not all milk production is eligible due to its production caps.
“In light of the legislative stalemate, the Dairy Security Act (DSA) was kicked to the wayside. While it didn’t receive praise from many processors and a few producer groups due to production controls during periods of high milk supply, it did offer margin protection or insurance based on a balanced approach of milk prices and feed costs. The DSA also represented the broadest and most public dairy producer led policy discussion our industry has seen in some time.”
Meanwhile, Jim Dickrell noted on Tuesday at AgWeb Online that, “If the farm bill is ever to pass, it will have to go through a more normal legislative process, say lobbyists who have worked on Capitol Hill for years.
“It cannot be wedged into larger budget bills that get rammed through Congress without debate.”
A news release Friday from University of Missouri Extension indicated that, “Although Congress extended the farm bill until Sept. 30, 2013, the director of the Food and Agricultural Policy Research Institute at the University of Missouri says several factors may cause Congress to revisit the legislation sooner rather than later.
“‘There’s a very good chance there could be changes in this legislation long before we get to September,’ Pat Westhoff said. ‘Not because we’ll necessarily pass a new five-year farm bill right away, but because upcoming negotiations on fiscal issues may cause us to make further cuts in programs to try to meet budgetary targets. That can mean changes in farm bill provisions even for the crop we harvest this fall.’
“Westhoff says that agricultural programs may be cut as part of three related budget debates that will occur over the next several weeks.”
Yesterday’s update also pointed out that, “Westhoff says many things could happen in the next several months that might affect farm program spending.
“‘In addition to the across-the-board sequestration, there are also annual appropriation bills that have to be passed in the next couple of months, and there is also the debt limit,’ he said. Both of those debates could also lead to proposals to cut farm program spending as part of broader efforts to limit government spending.
“‘I think a lot of people have assumed that we’ve got our farm bill in place for 2013, and it’s true as long as Congress doesn’t pass any new legislation,’ Westhoff said. ‘I think it would be a mistake to assume these things are written in stone. Some in Congress may want to come back and at least reexamine if not actually make changes in the bill they approved a month ago.’”
Gannett writer Christopher Doering reported earlier this week that, “The House Agriculture Committee has not decided when it will begin the arduous task of crafting a new farm bill, the head of the panel said Wednesday.
“Rep. Frank Lucas, R- Okla., said there are a lot of moving parts that are delaying action by the committee.”
“Collin Peterson of Minnesota, the top Democrat on the House Agriculture Committee, said lawmakers representing rural areas need to first see how they fare in the budget discussions,” the article said.
Mr. Doering noted that, “Peterson said the divide over the scope of cuts to nutrition programs, widely blamed last year for derailing hopes of passing a new farm law, was overblown. Republicans, he said, merely used it as a reason to give the public to explain why the bill was being delayed… [F]or now, Peterson said the committee is looking for guidance from House and Senate leaders as to how big the cuts to nutrition programs should be. ‘We have a list of changes that can be made to reduce the food stamp budget, so all we need is a number,’ said Peterson.”
Robert Pore reported late last week at the Grand Island Independent (Neb.) Online that, “While U.S. Rep. Adrian Smith, R-Neb., expresses frustration that a new Farm Bill wasn’t passed during the last session of Congress, he expects the new Congress to approve one.
“But a new Farm Bill will face new funding realities as Congress tackles the debt ceiling and spending cuts needed to address the growing federal debt, which has exceeded $16 trillion.”