Friday, March 2, 2012
Keith Good Farm Policy: Division Over Risk Management in Farm Bill
By Keith Good
Farm Bill Issues
DTN Ag Policy Editor Chris Clayton reported yesterday that, “The four farm groups at Commodity Classic are stressing they want to see a farm bill completed in 2012, but leaders acknowledge they remain divided on aspects of changing the farm programs.
“After an afternoon meeting Thursday, leaders of the American Soybean Association, National Corn Growers Association, National Sorghum Producers and National Association of Wheat Growers issued a joint statement urging Congress to pass a new farm bill in 2012 and not simply adopt an extension of current policies. Further, they reiterated their support for crop insurance as the key safety net for producers.
“‘As Congress continues work on the next farm bill, our organizations agree that an affordable crop insurance program is our No. 1 priority. We also stand ready to work with House and Senate Ag Committee leaders to create farm programs that provide risk-management tools to growers when they are facing a loss beyond their control.’”
Mr. Clayton noted that, “One of the difficulties in getting a farm bill this year is getting some consensus on changes to the commodity title. While almost every group acknowledges the $4.7 billion a year direct-payment program will go away, there are some major differences in crafting a new risk-management program. In a press conference, National Corn Growers President Garry Niemeyer, a farmer from Auburn, Ill., said the four groups would continue to meet and ‘work toward a common ground.’”
The DTN update added that, “The Obama administration has called for up to $8 billion more in cuts to crop insurance over the next decade, a plan that has been criticized by lawmakers. Further, the employee group that represents Farm Service Agency employees wants to see FSA take over some elements of the crop insurance program, arguing there are financial savings from doing so. That idea, however, has received a cool reception on Capitol Hill and from farm groups.”
Daniel Looker reported yesterday at Agriculture.com that, “Almost a year ago [Rep. Paul Ryan], a Republican budget hawk from Wisconsin, proposed trimming subsidies for crop insurance in his annual budget. And last month, the President’s own budget proposal for the 2013 federal fiscal year floated about $8 billion in cuts over 10 years to crop insurance subsidies, including farmer premiums.”
Yesterday’s article indicated that, “Earlier Thursday, when leaders of the National Corn Growers Association talked to reporters about Congress’s work on the next farm bill, the group’s chairman, North Dakota farmer Bart Schott, said, ‘We do not want to have them cut crop insurance at all.’”
More specifically on the House budget process for this year, Erik Wasson reported yesterday at The Hill’s On the Money Blog that, “House Budget Committee Republicans, and the wider House GOP caucus, are divided on whether to cut discretionary spending next year deeper than the level set by the August debt deal, complicating Budget Chairman Paul Ryan’s task of writing a budget resolution this month.
“Some members want to stick to the $1.047 trillion discretionary spending level set out in August’s Budget Control Act. They want further spending cuts to be taken from mandatory entitlements such as food stamps and Medicaid.”
Meanwhile, an update posted yesterday at the Southeast Farm Press Online noted that Senate Agriculture Committee Ranking Member Pat Roberts (R., Kans.) addressed a group of Alabama farmers in Washington, D.C. on Wednesday and stated that, “‘When you’re cutting the budget, you don’t have to do it with a Lizzie Borden meat ax,’ he said. ‘You can use a scalpel, and then take a look at it and see what you’ve done and what you’ve done to policy. But a meat ax-approach is really very counterproductive.’”
Also yesterday, Chris Clayton noted in a separate report at the DTN Ag Policy Blog that, “As part of the official kickoff for RURAL-TV, a sister station to RFD-TV, Agriculture Secretary Tom Vilsack held a town hall meeting Thursday night in Nashville at the RFD-TV studio.
“Vilsack, who speaks Friday at the general session of Commodity Classic, gave his perspectives on rural development and biofuels, as well as the farm bill. He challenged Congress to ‘think boldly’ on the farm bill.
“‘It’s my hope that Congress sees the opportunity to be big and bold,’ he said.”
The update explained that, “Several leaders from the commodity groups attended the event. Vilsack was asked by a member of the National Corn Growers Association how the administration could think about cutting crop insurance with so much volatility and the value that crop insurance provides producers in managing disasters.
“Vilsack said there is going to be an interesting conversation about budget cuts and exactly how much will be asked of the House and Senate Agriculture Committee to cut. There are only so many pots of money — direct payments, conservation nutrition programs and crop insurance.
“Vilsack asked how much return on investment is needed to be solvent and retain integrity in the program. A USDA study pegged 12% as a sufficient rate of return today. Crop insurance companies are making 14-17%, he said.”
Also on the crop insurance issue, Reuters reported yesterday (article via DTN, link requires subscription) that, “Crop insurance price guarantees for 2012 should encourage U.S. farmers to plant corn over soybeans, analysts said on Thursday.
“The U.S. Department of Agriculture’s Risk Management Agency on Thursday set the guarantees, which act as the ‘floor price’ for crop insurance policies, at $5.68 per bushel for corn and $12.55 a bushel for soybeans across most of the U.S. crop belt.
“The prices are based on the average settlement for Chicago Board of Trade December corn futures and November soybean futures in February.”
The Reuters article pointed out that, “Planting season in the core Midwest crop belt is a little over a month away. The deadline to buy a crop insurance policy is March 15.
“‘If anything, these numbers favor corn planting over soybean planting,’ said Gary Schnitkey, an agricultural economist with the University of Illinois.
“However, he added, farmers have a range of considerations in deciding what to plant, including crop rotation schedules. Fields planted to corn for two or three years in a row tend to yield less than corn on fields planted to soybeans the previous year, he noted.”
A news release yesterday from the House Agriculture Committee stated that, “Today, Chairman Frank Lucas announced a series of field hearings on the 2012 Farm Bill to take place throughout March and April. The first one is scheduled for upstate New York with other stops slated for Illinois, Arkansas and Kansas. The hearings will give Members of the House Agriculture Committee the opportunity to hear firsthand how U.S. farm policy is working for farmers and ranchers in advance of writing legislation.
“The field hearings are the next step in the farm bill development. Last June, Chairman Lucas began the effort when the Agriculture Committee held 11 audit hearings on agriculture programs to look for ways to improve programs for farmers, increase efficiency, and reduce spending. The information gained from the audits combined with perspective from the field will serve as a useful reference for Committee Members.”
The first of the four field hearings is scheduled for next Friday.
Meanwhile, Jonathan Knutson reported yesterday at the Grand Forks Herald Online (N.D.) that, “The sooner the next farm bill is passed, the better, an aide to Sen. Al Franken, D-Minn., said at a meeting in East Grand Forks.
“‘Now’s the time to get it done,’ said Al Juhnke, agriculture/energy field representative for Franken. Approving new legislation would become more difficult as Election Day this fall comes nearer, he said.
“Juhnke, a former Minnesota state legislator, talked about the 2012 farm bill Thursday afternoon at City Hall. Representatives of Rep. Collin Peterson, D-Minn., and Sen. Amy Klobuchar, D-Minn., were present, too.”
More specifically on the Farm Bill timing issue, Sen. Mike Johanns (R., Neb.) indicated in a news teleconference yesterday that, “There continues to be some optimism on the Senate Ag Committee — Agriculture Committee — that we can get our way through the hearing process and start to develop a farm bill. I continue to believe that the best chance of a farm bill process going forward is in the Senate Ag Committee. I can even, kind of, see how you could put a coalition together to maybe pass a farm bill on the Senate floor, although that gets tougher.
“I’m not as familiar with the House. Of course, the House would also have to pass something and then in all likelihood it would go to conference.
“The one thing I keep reminding people about is that something has to happen this year. The previous farm bill expires with this crop season. So if we don’t do something, we revert back to a 1949 farm bill. And we don’t want to do that, I can guarantee that. So something has to happen.”
Denise Ross reported earlier this week at The Daily Republic Online (Mitchell, S.D.) that, “[Sen. John Thune (R., S.D.)] said there has been some discussion that committee members could mark up a new farm bill before Easter, with a goal of passing a final bill before the current bill expires Sept. 30.
“‘We need to make sure we create ag policy that provides an adequate safety net, makes ag production sustainable and is not damaging to the environment,’ Thune said.
“He repeated his past statements that crop insurance is likely to be key to the next farm bill and that direct payments are likely to end as Congress looks for ways to cut spending.”
Additionally on conservation issues, the AP reported today that, “The U.S. Department of Agriculture will unveil a new program Friday that will offer financial incentives for farmers to enroll up to 1 million new acres of grasslands and wetlands into the conservation reserve program.”
A news release yesterday from Indiana GOP Senator Richard Lugar stated that, “[Sen. Lugar] called on members of Congress to support the Rural Economic Farm and Ranch Sustainability and Hunger (REFRESH) Act, S. 1658, which would save taxpayers $40 billion over the next ten years…Rep. Marlin Stutzman (R-IN) co-introduced the REFRESH Act in the House (H.R. 3111). This legislation, first introduced October 5, 2011, was sent to members of the House and Senate Agriculture, Nutrition and Forestry Committees and Joint Select Committee on Deficit Reduction (JCDR). Lugar and Stutzman are pushing again this year for it to become an agriculture policy.”
In other Farm Bill news, Ruth Messinger and Rabbi Steve Gutow noted earlier this week at The Hill’s Congress Blog that, “In an effort to achieve our values-inspired vision of food justice, American Jewish World Service and the Jewish Council for Public Affairs have come together with four other national Jewish organizations – the Coalition on the Environment and Jewish Life, Hazon, MAZON: A Jewish Response to Hunger, and the Union for Reform Judaism – to form the Jewish Farm Bill Working Group. These organizations are joined by several others in endorsing a statement of principles called the “Jewish Platform for a Just Farm Bill.” (Related document here).
“We are united in the belief that as people of faith we cannot stand idly by when millions go hungry at home and abroad. The link between food and faith obligates our community to challenge the injustice of hunger, to champion the rights of all for nutritious food, and to steward the land on which our sustenance depends. The reauthorization of the Farm Bill is an opportunity to put these principles into practice.”
More specifically on the SNAP program, the Washington Insider section of DTN reported yesterday (link requires subscription) that, “The president has requested $82 billion to fund the supplemental nutrition assistance program (SNAP) during fiscal 2013, and while House appropriators are not publically balking at the request, they are understandably concerned that the funds be spent as intended.
“During a hearing earlier this week conducted by the House Agriculture Appropriations Subcommittee, panel Chairman Jack Kingston, R-Ga., questioned USDA officials about the error rate associated with the program as well as cases of outright fraud, both of which drive up the cost of SNAP, previously known as the food stamp program.
“USDA Under Secretary Kevin Concannon responded that the fraud rate for SNAP is about 1%, and the error rate is a record low 3.8%. Errors include both over- and underpayments. Kingston questioned the accuracy of the department’s accounting, while former subcommittee Chairman Rosa DeLauro, D-Conn., pointed out that the SNAP error is lower than the 4.7% error rate for the federal crop insurance program, a figure also reported by USDA.”
From hunger issues to obesity, Christopher Shea reported earlier this week at the Ideas Market Blog (The Wall Street Journal) that, “Agricultural subsidies have attracted the ire of food writers and nutrition experts, who partly blame them for the scourge of high-calorie, highly processed junk foods — and, in turn, for the American obesity epidemic. This argument was one of the threads running through Michael Pollan’s influential ‘The Omnivore’s Dilemma,’ for example, and is prominently featured in such documentaries as ‘Food, Inc.’
“But the link between such subsidies and obesity is highly tenuous, according to a study that analyzed the effects of price supports on diet. In fact, if all subsidies were magically erased— including trade barriers — the typical American adult would actually respond by eating about 3,000 to 3,900 additional calories a year: A cutting back on grains and meats, today artificially cheap, would be more than offset by the eating of more sugar and dairy products, now artificially expensive (and especially calorie-dense). That’s the opposite effect of the one predicted by many commentators, but still a very small one, given that the typical adult requires something on the order of 2,000 to 2,500 calories daily.”
For more on this issue, see this article from last April by Professor Robert Paarlberg, “The Inconvenient Truth About Cheap Food and Obesity: It’s Not Farm Subsidies.”
In other news, the AP reported today that, “A Central Texas river authority said Friday that Hill Country lakes fell short of levels sufficient to provide irrigation water to downriver rice farmers. That makes 2012 the first year in which the farmers will not get the water from the Lower Colorado River Authority.”
And Phyllis Korkki reported in yesterday’s New York Times that, “More than a century ago, many universities created extension departments expressly to help farmers improve their crops. Over the years, these departments have broadened, with farming still taught but sometimes overshadowed by classes covering every corner of the sciences and humanities.
“Now more continuing education classes are returning to their agricultural origins, as people living in cities, towns and suburbs express interest in small-scale farming.”
The Times article noted that, “But in just the last few years, more beginning farmers with small plots of land have stepped into the mix. Just a few years ago, the Milwaukee campus began offering a beginning farming class in response to demand. That requires a different kind of lesson plan than one for a commercial farmer with hundreds of acres, or a family farmer who has been steeped in agricultural knowledge since birth.”
Alan Beattie reported earlier this week at The Financial Times Online that, “Senior US lawmakers plan to legislate to allow anti-subsidy tariffs to be imposed on imports from China, overriding a federal court which said the practice contravened US trade law.
“Dave Camp, chairman of the House of Representatives ways and means committee, which regulates trade, said on Wednesday: ‘This legislation preserves our ability to fight unfair subsidies granted by countries like China that injure our industries, cost US jobs and distort the market.’”
Brent Kendall reported earlier this week at The Wall Street Journal Online that, “After a two-day hearing, a federal appeals court appeared inclined to uphold key parts of the Obama administration’s first-ever rules for reducing greenhouse gases, but it wasn’t clear whether the court would endorse the government’s entire approach.”
Earlier this week, the House Agriculture Committee held an oversight hearing where Commodity Futures Trading Commissioner Gary Gensler testified. Issues regarding CFTC rule making stemming from the Dodd-Frank financial reform bill were among the issues that were addressed.
With that background in mind, Secretary of the Treasury Tim Geithner penned an Op-Ed that was published in today’s Wall Street Journal where he noted in part that, “The Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by the president on July 21, 2010, put in place safer and more modern rules of the road for the financial industry. Yet only four years after the financial crisis began to unfold, some people seem to be suffering from amnesia about how close America came to complete financial collapse under the outdated regulatory system we had before Wall Street reform.
“Remember the crisis when you hear complaints about financial reform—complaints about limits on risk-taking or requirements for transparency and disclosure. Remember the crisis when you read about the hundreds of millions of dollars now being spent on lobbyists trying to weaken or repeal financial reform. Remember the crisis when you recall the dozens of editorials and columns against reform published on the opinion pages of this newspaper over the past three years.”
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