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    Tuesday, February 7, 2012

    Keith Good Farm Policy: Lines Being Drawn in Battle to Shape Farm Bill


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    Farm Bill

    The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “In the early going in the debate over replacement legislation for the expiring 2008 farm bill, there is now a lot of confusion and a couple of early ideas that deserve attention. This follows early talk that the grab-bag of ideas patched together for the super committee last fall might serve as a template for the next bill. Now, that idea is being viewed increasingly skeptically by old-timers who wonder about an approach that treats commodities and regions as differently as that one did.

    “So far, two stalwarts of earlier farm bill wars have weighed in with their ideas. The first is fronted by Senate Budget Committee Chairman Kent Conrad, D-N.D., who says he is re-tooling a package of old and new programs that seems to be designed to appeal first to northern producers. It would build on the Aggregate Risk and Revenue Management program sponsored last year by Sens. Sherrod Brown, D-Ohio, John Thune, R-S.D., Dick Durbin, D-Ill., and Dick Lugar, R-Ind., as well as the Ag Risk Coverage program, offered by Ag Committee Chairs Debbie Stabenow, D-Mich., and Frank Lucas, R-Okla., in their super committee package last fall. In earlier discussions, those proposals were supplemented by a separate program for cotton along with higher target prices for several specific crops. Conrad’s staff hints that a similar ‘sweetening’ could happen again.”

    The DTN update added that, “The second approach, and a very different one, comes from the American Farm Bureau Federation, and is intended, AFBF spokesmen say, to provide producers with more protection from large down-side risks than current programs do, and allow them to ‘buy up’ coverage on their own to deal with the upper end of the risk profile.

    “This proposal would provide area coverage similar to the Group Risk Income Protection policies offered today, and premiums would continue to be subsidized. And, if producers buy individual policies that ‘wrap’ their core policy, these could cost less, too.”

    After a more detailed analysis, the DTN update stated that, “So, the fight for the heart and soul of the 2012 bill has begun. In the one corner is yet another extremely complicated, high-trade off bill that is being fought over by commodity groups and others for the right to offer more to producers more often, to the point where it likely will have difficulty meeting the budget constraints without the flagrant use of smoke and mirrors that frequently accompany such proposals.

    “On the other side is what looks like a low-intervention approach, with a lot of details remaining to be revealed including the level of government subsidies to be offered for most of the provisions. And, with all the talk of budget consciousness and anti-government feeling, it will be interesting to see how these various approaches play out with the congressional leadership — as well as with the broader farm organization leadership who will be busy scrutinizing all available options throughout the spring, Washington Insider believes.”

    An update yesterday from USDA’s Radio News Service noted that, “Lawmakers are talking about making crop insurance the centerpiece of the new farm bill, but USDA officials say other safety net programs should not be eliminated.”  To listen to this one-minute audio overview, just click here.

    Also yesterday, USDA’s Economic Research Service (ERS) released a report titled, “Changing Farm Structure and the Distribution of Farm Payments and Federal Crop Insurance.”

    An ERS summary of the report stated that, “The distribution of commodity-related payments and Federal crop insurance indemnities to U.S. farmers has shifted to larger farms as more and more U.S. agricultural production is done on those farms. Since the operators of larger farms tend to have higher household incomes than other farm operators, commodity-related program payments and Federal crop insurance indemnities also have shifted to higher income households. By 2009, half of commodity-related program payments went to farms operated by households earning over $89,540, a quarter went to farms operated by households with incomes greater than $209,000 and 10 percent went to farms operated by households with incomes of at least $425,000. Current income eligibility caps and payment limits affect few farm households because most of them have incomes below the income caps or receive payments less than the payment limits. Based on 2009 Agricultural Resource Management Survey (ARMS) data, recent proposals to lower those income caps and payment limits would still affect only a small percentage of U.S. farm households, because their incomes would still fall below the proposed income caps and payment limits. Total Government program payments to U.S. farms were $12.3 billion in 2009. Total Federal crop insurance indemnity payments were $5.2 billion in 2009.”

    And on nutrition issues, Reuters writer Lisa Baertlein reported yesterday that, “Stung by election-year criticism of a program used by one in seven Americans, administrators of U.S. food stamp benefits are intensifying efforts to combat fraud and protect the $75.3 billion plan from the budget axe.”  Related USDA news release here, related USDA one-minute audio recap here.

    Meanwhile, Dina ElBoghdady reported in today’s Washington Post that, “Nearly half of elementary school children can buy junk food at school, a trend that contributes to the childhood obesity epidemic and underscores the need for federal regulation of school snacks, according to a study published Monday in a pediatric journal.

    “The study, funded by the Robert Wood Johnson Foundation, comes as federal regulators are crafting a proposal that would set new nutrition standards for foods and beverages sold in vending machines, snack bars and elsewhere in schools.

    “The proposal will not cover foods that are part of the federally subsidized school meal program. That program was revamped recently by the Obama administration and requires participating school cafeterias to start serving twice as many fruits and vegetables, more whole grains and less sodium and fat when the next school year begins.”

    And the AP reported yesterday that, “You may like the food you buy, but is it ‘Great for You’?

    “Wal-Mart Stores Inc. plans to help its customers figure that out by adding a new green icon that reads ‘Great for You’ to packaging of some of its house-brand foods.”

    In news regarding USDA, Reuters reported yesterday (article posted at DTN, link requires subscription) that, “The Agriculture Department, the primary source of U.S. crop and livestock data, will create nine regional centers in a move to provide more in-depth analysis while saving money, said Agriculture Secretary Tom Vilsack on Monday.

    “The centers, due to open in 2013, will be staffed by analysts who now work in state offices. The centers are the latest change in USDA reporting as it adjusts to federal budget cuts. USDA has eliminated half a dozen reports in the past year and said it would not report as often on vegetables and 13 fruit crops.”

    The article explained that, “USDA’s statistical agency produces roughly 500 reports annually, from counting the cattle and hog populations to estimating plantings of dozens or crops, the size of their harvests and how many bushels of corn or soybeans are in U.S. grain bins.

    “Congress allotted $158.6 million for the National Agricultural Statistics Service this fiscal year, $7 million less than USDA requested but a 1% increase from the previous year, when funding was cut by 3% in an effort to reduce the federal deficit.”

    Budget- Payroll Tax- Transportation Bill

    John Stanton reported today at Roll Call Online that, “Republicans and Democrats alike are hoping to make 2012 a grudge match over the budget, closely tracking the topic that helped drag Congressional approval ratings to record lows last year and despite concerns among political operatives that the public is unmoved by the issue.

    “Although little more than a nonbinding resolution — made largely moot by last summer’s Budget Control Act — members of both parties’ leadership see this year’s budget as a prime battleground of the 2012 elections and are ramping up similar messaging machines to those used last year.”

    The article noted that, “But while Republican acknowledge they need to do a better job of linking the budget and the economy, particularly what they view as the negative effects of the administration’s plans, they say it will become a central theme when President Barack Obama releases his budget next week.”

    Laura Meckler reported in today’s Wall Street Journal that, “President Barack Obama will release his budget plan next week, calling for $3 trillion in deficit reductions over 10 years, including $1.5 trillion in tax increases to fall mostly on the wealthiest Americans.

    “If that sounds familiar, it’s because the president essentially laid out his budget plan in September, following a failed bipartisan deficit-reduction deal. Mr. Obama’s plan for fiscal year 2013, which starts Oct. 1, will mirror the September proposal, senior administration officials said. In presenting his plan, Mr. Obama will argue for new spending in targeted areas, tax cuts to spur manufacturing and new investments in education. He will build on his State of the Union message, saying his plan would foster an ‘America built to last,’ aides said.”

    However, the Journal article pointed out that, “None of Mr. Obama’s major proposals are expected to become law before November’s elections, given both partisan divides in Congress over priorities as well as election-year politics.”

    On the payroll tax cut issue, Josiah Ryan reported yesterday at The Hill’s Floor Action Blog that, “Senate Majority Leader Harry Reid (D-Nev.) hit the Senate floor with guns blazing Monday afternoon, accusing Republicans of lacking commitment for renewing the popular payroll tax holiday, which currently benefits about 160 million Americans.”

    While Molly K. Hooper reported yesterday at The Hill’s On the Money Blog that, “House Majority Leader Eric Cantor said Monday that House Republicans would be hard-pressed to vote for another 60-day extension of the payroll tax cut.

    “The Virginia Republican told reporters on Monday that it would be ‘inexcusable’ if a conference of lawmakers fails to agree to a year-long extension of the tax cut, which was extended by two months at the end of last year.”

    And Burgess Everett and Adam Snider reported yesterday at Politico that, “The House’s surface transportation bill — the GOP’s major job-creation initiative — is off to an inauspicious start, but Republican leaders are pushing full speed ahead.

    “Although several conservative groups have criticized the five-year, $260 billion measure for relying too much on nontraditional revenue sources like oil drilling, House leaders received a critical endorsement from Grover Norquist, the founder and president of Americans for Tax Reform.”

    Yesterday’s article pointed out that, “Majority Leader Eric Cantor (R-Va.) said the bill is set to hit the floor next week, a schedule designed to give lawmakers enough time to study it in detail.

    “Last week, three committees passed major sections of the bill: Ways and Means approved the financing title; Natural Resources cleared three energy bills — including oil drilling in the Arctic National Wildlife Refuge — designed to cover some of a shortfall that estimates indicate could top $50 billion; and Transportation and Infrastructure spent 18 hours considering 103 amendments.”

    Also yesterday, Reuters writer Roberta Rampton reported that, “Republicans in the U.S. House of Representatives will try to force quick approval of the Canada-to-Texas Keystone XL oil pipeline using a highway funding bill, but the plan’s author said on Monday there may be more than one avenue for advancing the project.”

    Ms. Rampton added that, “A key House panel is set to vote on Tuesday to attach a plan to speed approval for the project into the highway bill, but a must-pass payroll tax cut legislation provides another option, said Lee Terry, a Republican from Nebraska.”

    Agricultural Economy

    Bloomberg writers Rudy Ruitenberg and Tom Randall reported yesterday that, “The concept of ‘peak food,’ that the production will reach an apex that can’t be topped, is more a function of population than of agricultural limits. The world should be able to produce enough food to feed everyone when the human numbers peak late this century, says José Graziano da Silva, director general of the United Nations Food and Agriculture Organization (FAO). However, thestrains on the global pantry are real. While the Earth has plenty of natural inputs — land, nutrients and water — humans face a growing challenge to manage them.

    “The human population is headed to 9.3 billion by 2050, with the middle class expanding from 1.8 billion to 4.9 billion consumers, according to estimates by the UN and the Organization for Economic Cooperation and Development. Global farm output must rise 70 percent by 2050 to nourish everyone, as more people seek a higher calorie count every day, according to the FAO.

    “‘We need to improve production,’ Graziano da Silva said. ‘The problem is how to do that without destroying the natural reserves, as we are doing now, wasting water, erosion of soils, destroying forests.’”

    Bloomberg writers Jeff Wilson and Whitney McFerron reported today that, “U.S. farmers will plant the most acres in a generation this year, led by the biggest corn crop since World War II, taking advantage of the highest agricultural prices in at least four decades.

    “They will sow corn, soybeans and wheat on 226.9 million acres, the most since 1984, a Bloomberg survey of 36 farmers, bankers and analysts showed. The 2.5 percent gain means an expansion the size of New Jersey, as growers target fields left fallow last year and land freed up from conservation programs.”

    For a concise look at current variables associated with the corn market, see this update yesterday by University of Illinois Agricultural Economist Darrel Good, “Corn Market Remains Unsettled.”

    MF Global

    Aaron Lucchetti reported in today’s Wall Street Journal that, “A bankruptcy trustee investigating MF Global Holdings Ltd. said he faces huge challenges getting back an estimated $1.2 billion in customer funds drained from the securities firm before it collapsed.

    “In a report Monday, James W. Giddens told a bankruptcy-court judge that investigators have ‘traced a majority of the cash transactions’ made by the New York company as it scrambled to stay alive during the last week of October.”

    The Journal article added that, “Much of that money went to banks, exchanges, clearinghouses, other firms and MF Global affiliates, the bankruptcy trustee added, cautioning that further work is needed to reach a definitive conclusion about ‘where the property wired out’ of the securities firm’s customer-segregated account ‘ultimately ended up.’

    “But in an ominous sign for farmers, ranchers and other commodities investors who were customers of MF Global, Mr. Giddens said it could be hard to retrieve the money even if he finds it.”

    David S. Hilzenrath reported in today’s Washington Post that, “It remains to be seen whether the money can be recovered, trustee James W. Giddens said in an update on his investigation of MF Global’s collapse.”

    Trade

    Yuka Hayashi and Tom Barkley reported in today’s Wall Street Journal that, “Japan’s push to enter a broad Asia-Pacific trade pact [the Trans-Pacific Partnership, or TPP] faces one of its toughest challenges this week: acceptance from Washington.

    “Opposition from American manufacturers and unions, combined with doubts about Tokyo’s ability to deliver on promises, could create obstacles.”

    The Journal writers pointed out that, “In addition to Japan, Canada and Mexico have expressed interest in joining TPP negotiations. Analysts expect South Korea and China also eventually will seek to enter the group.

    “Trade officials and analysts say Japan’s success at this week’s bilateral meeting with Washington depends largely on how flexible Tokyo can be on liberalizing its agricultural sector. In past trade negotiations, Japan has made so many exceptions for items—nearly all agricultural products like rice, dairy products and meat—it weakened the effectiveness of such pacts. Japan’s existing agreements usually cover 85% of all items, compared with well over 95% for similar agreements among other countries.”

    And for an interesting summary about an upcoming visit by Chinese Vice President Xi Jinping to Iowa next week, see this update today from the China Real Time Report (Wall Street Journal), “From Pope to Pork Sales: Iowa Gets Excited Over Xi Visit.”  Xi is expected to become China’s next leader.

     

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