Keith Good Farm Policy: Don’t Shave Subsidies, House Ag Chair Warns
Farm Bill Issues
Daniel Looker reported yesterday at Agriculture.com that, “The chairman of the [House Agriculture] committee, Representative Frank Lucas (R-OK) recently told North American Agricultural Journalists in Washington that the crop insurance industry has already given much to reducing the federal deficit. He and the leaders of congressional ag committees from both parties have opposed a line in the Obama Administration budget for 2013 that would shave crop insurance premium subsidies for farmers by two percentage points.
“‘Don’t kill the program by taking away the incentives to participate.’ Lucas told NAAJ.
“The version of a 2012 farm bill passed last week by the Senate Agriculture Committee doesn’t cut crop insurance subsidies.”
Mr. Looker noted that, “In April, the cost of crop insurance made it into the pages of The New York Times when a report by the Government Accountability Office, the investigative arm of Congress, on that topic became public. The study was requested by Senator Tom Coburn, a fiscal conservative Republican from Oklahoma. (Coburn, you may recall, was part of the bipartisan ‘Gang of Six’ senators who tried to find agreement on deficit cutting last summer.)”
Yesterday’s article noted that, “In a report released this week, University of Illinois agricultural economist Gary Schnitkey, one of the nation’s authorities on crop insurance, crunched the numbers on how a $40,000 cap would have worked in recent years.
“The insurable value of your crop revenue goes up with high prices, and so do the premiums. That means you’ll hit the cap sooner in years like last year. By Schnitkey’s calculation, a farm in Illinois with 1,682 insured acres would have hit the limit in 2011. In 2010 it would have taken 2,710 acres.
“Schnitkey uses Illinois Farm Business Farm Management records to adjust his calculations to reflect that a portion of a typical farm in that state is on a 50/50 share rent arrangement, where the farmer would pay half of the premium. Farms that are all owned or cash rented would be affected differently.”
After additional analysis, Mr. Looker noted that, “[Representative Collin Peterson, the ranking Democrat on the House Agriculture Committee, speaking to members of North American Agricultural Journalists last month in Washington] pointed out that a recent standard reinsurance agreement between USDA and the private insurance companies that sell crop insurance cut some $6 billion in subsidies to the industry.
“‘I’m told by some of the companies if we go too far here, that we could see a mass consolidation in the industry,’ Peterson said, ‘… that we could end up with two companies. If we screw this thing up that’s what will happen.’
“Peterson said he’s unwilling to make big changes in crop insurance until Congress can evaluate how the industry and the program is affected by rerating of crop insurance. Starting this year, corn and soybean farmers in the Midwest are seeing a slight drop in premiums due to rerating, while producers in Texas, Colorado and other higher risk areas have seen an increase.
“‘We have no data on how all those changes have played out,’ Peterson said.”
Yesterday’s article added that, “But Peterson did hold the door open for changes to the subsidies for farmer premiums.
“‘I think the more salient questions about crop insurance is looking at the subsidies, are we at the right level?’ he asked.”
DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “The chance of a farm bill coming out of the U.S. Senate anytime soon could hinge largely on safety net prospects for a pair of Southern crops that collectively account for about 4.5 million acres of the 320 million or so acres that will be planted this year.
“With the cotton industry largely satisfied with its new insurance program, rice and peanut farmers are counting on Southern senators to make a stand for them before the Senate floor debate on the new farm bill. They also see more hope in the House, where Agriculture Committee Chairman Frank Lucas, R-Okla., has said the Senate farm bill doesn’t do enough to factor in regional and crop differences.”
Mr. Clayton pointed out that, “Randy Veach, president of the Arkansas Farm Bureau, is a cotton, rice, soybean and wheat farmer in northeast Arkansas, who said farm groups will be working to make changes to the Senate bill. If lawmakers are going to do away with direct payments, then an alternative commodity program is needed that will be better than what is in the Senate bill, Veach said.”
“Problems with rice and peanuts stem partly from not having a good alternative to direct payments. The National Cotton Council also has raised concerns about the Senate bill, but is supportive of the legislation including the insurance program proposed by NCC, the Stacked Income Protection Program. Craig Brown, vice president of producer affairs for the cotton council, told the Agritalk radio program on Tuesday, ‘If the cotton provisions remain as they are, then it’s a bill we can support.’”
Yesterday’s DTN article indicated that, “Still, cotton, peanuts and rice have seen significant declines in commodity program payments since the beginning of the 2008 farm bill. Cotton payments this year are forecast at 20% of what they were in 2007. Peanut payments are 16% of 2007 figures. Rice payments are more equal and haven’t seen the variability or decline of other crops.
“Armond Morris, chairman of the Georgia Peanut Commission, said it’s difficult to find one commodity program that would work for everyone. Morris noted he was facing high energy costs because a drought right now in Georgia demands irrigation on all of his crops. Like other Southerners, he would like to see the counter-cyclical program remain with a better target price installed.
“‘The bankers have got to know there is going to be enough return on that acre of peanuts to pay the bills,’ Morris said.”
Also yesterday, the “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “A key issue as the 2012 farm bill comes together is the degree to which support and risk management programs affect farmers’ future planting decisions. The greater a program’s potential to influence the mix of crops, the greater will be the potential for the United States to be the defendant in a World Trade Organization dispute settlement undertaking.
“Already, Brazil’s ambassador to the WTO is questioning the cotton provisions of the farm bill that was approved last week by the Senate Agriculture Committee. Roberto Azevedo expressed concern that the new provisions will not correct distortions to which Brazil objected earlier and which led to a WTO ruling against the United States. ‘It looks very similar to what has been proposed by the National Cotton Council which, from our previous analysis, would introduce a very high element of distortion in the cotton markets,’ Roberto Azevedo said.”
The DTN item stated that, “Meanwhile, even here, potential production and marketing distortions of the Senate measure’s programs have come up. Ohio State University agricultural economist Luther Tweeten has noted that if new crop insurance provisions result in increased production of some crops, competing countries could challenge crop insurance in a WTO court as giving U.S. producers unfair advantages of certain commodities.
“Over the years, members of Congress have been fond of saying that U.S. farm policy will be written in Washington, not at WTO headquarters in Geneva. That is true, of course. Still, when Congress does finalize its work on the 2012 Act, it would be a good idea to at least consider how other WTO members may view U.S. farm programs as a way to avoid trade headaches down the road.”
Meanwhile, a news release yesterday from Senate Agriculture Committee Chairwoman Debbie Stabenow (D., Mich.) indicated that, “[Chairwoman Stabenow] led the Committee in considering and approving the Agriculture Reform, Food and Jobs Act of 2012 last week with broad bipartisan support. The bill reforms food and agricultural policy by eliminating direct payments, consolidating programs and ending duplication, and cracking down on abuse in food assistance programs. This new Farm Bill saves $23 billion whilestrengthening crop insurance and other initiatives that help create American agricultural jobs (a summary of the bill can be found here).”
Yesterday’s release added that, “Following are statements from a wide variety of Michigan-based and national organizations and stakeholders, praising the bill for its major reforms and for the collaborative, inclusive and exceptionally bipartisan process of drafting it.” This lengthy list of statements can be viewed here.
A news release on Wednesday from Rep. Vicky Hartzler (R., Mo.) stated that, “[Rep. Hartzler], a member of the House Agriculture Committee, has hosted a roundtable discussion in Clinton today to gather input from representatives of Missouri’s agriculture community to collect their thoughts on the 2012 Farm Bill that is making its way through Congress.
“‘The purpose of this meeting was to bring together farmers and ranchers who are going to be most affected by the Farm Bill,’ said Hartzler. ‘Decisions regarding agriculture should be made by these stakeholders – NOT by Washington bureaucrats. It is imperative that the thoughts and concerns of farmers and ranchers be represented when the Farm Bill gets to the floor of the House for a vote.’”
And more specifically on budget issues, David Rogers reported earlier this week at Politico that, “The House Budget Committee meets Monday afternoon to put the final touches on the more than $300 billion 10-year package — the opening shot of a fall campaign to preserve defense spending without bowing to Democratic demands for new taxes.
“Monthly food stamp benefits would be cut, hitting millions of single-mother households by summer’s end.”
Mr. Rogers noted that, “There have been ugly moments in the course of committee markups: snide comments about what food stamp recipients buy at the local grocery line…” (Note that some excerpts from the House Agriculture Committee Business meeting on this issue from April 18 can be viewed here).
Ed O’Keefe reported yesterday at the 2Chambers Blog (Washington Post) that, “House Democrats plan to attack the spending plan next week as the GOP-controlled House votes on a budget reconciliation package that includes cuts to replace automatic, across-the-board reductions set to begin in January as part of the Budget Control Act. The BCA raised the debt ceiling, cut $1 trillion in federal spending and authorized another $1.2 trillion in cuts over the next decade, with roughly half of the money coming from defense spending.”
And, Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “The House will return next week to start the process of passing FY 2013 appropriations bills, and will begin by considering legislation funding the Departments of Commerce and Justice, as well as the National Aeronautics and Space Administration and other agencies.
“The House Rules Committee will meet the evening of May 7 to approve a rule for the bill and could start floor consideration as early as May 8.”
A news release Monday from Senator Ron Wyden (D., Ore.) stated that, “Looking to increase jobs and economic development in Oregon, [Sen. Wyden] said today that negotiations to open up Asian-Pacific markets and Congress’ consideration of a new Farm Bill offer opportunities to increase the domestic sale and international export of Oregon agricultural products.
“‘My guiding principle in improving the Oregon economy is that we grow things here, add value to them and ship them somewhere, and nothing says that more than selling more Oregon fruits, vegetables and other high-value products at home and aboard,’ Wyden said. ‘Fortunately, we are at a point – domestically and internationally – where we can do something about both.’”
The release noted that, “Wyden said that the Trans-Pacific Partnership negotiations offer an opportunity to open markets in developed countries such as New Zealand and Australia, along with emerging markets like Vietnam and Malaysia. There is also a significant chance that Japan, one of the most closed markets to Oregon agriculture, will join the negotiations.”
A news release yesterday from Senator Charles Grassley (R., Iowa) indicated that, “[Sen. Grassley] is urging the Obama administration to focus on resolution of ongoing trade and related disputes at the U.S.-China Strategic & Economic Dialogue.
“This dialogue began in 2006 as a framework for the two countries, which represent the largest and second-largest economies in the world, to discuss economic issues.
“Grassley signed a letter sent yesterday to the four cabinet secretaries participating in the meeting.”
In part, the letter stated that, “The continued growth in U.S. agriculture exports to China exemplifies the mutually beneficial potential of the U.S.-China economic relationship. American farmers and ranchers are the most competitive in the world, and they can help feed the large Chinese population as per-capita income and caloric intake improves across the country. But to reach these new markets, China must abide by science-based international food and safety standards. China must not erect arbitrary sanitary and phytosanitary barriers to prevent American agriculture exports from reaching the Chinese market. Erecting such barriers in retaliation for unrelated U.S. policies continues to harm America’s competitiveness and farmers and ranchers.”
A news release yesterday from the Food and Agriculture Organization of the United Nations stated that, “Global food prices measured by the FAO Food Price Index fell three points or 1.4 percent from March to April 2012 but seem to have stabilized at a relatively high level of 214 points, FAO said today.
“The fall was the first after three consecutive months of increases and although the index is significantly down from its record level of 235 points in April 2011, it is still well above the figures of under 200 which preceded the 2008 food crisis.
“The index was published in the latest FAO Food Outlook, a global market analysis which comes out twice a year.”
Daniel Strauss reported yesterday at The Hill’s Floor Action Blog that, “Rep. Michael Grimm (R-N.Y.) is calling on the Department of Justice to hand over the investigation of MF Global Holdings to an independent counsel.
“Grimm, a member of the House Financial Services Committee, is circulating a letter to his colleagues urging Attorney General Eric Holder to appoint an independent counsel to handle the investigation of the collapsed brokerage firm run by former Sen. Jon Corzine (D-N.J.). Grimm plans to send the letter to Holder in a week.”
A news release yesterday from USDA stated that, “Agriculture Secretary Vilsack today called on petroleum companies to help increase the percentage of ethanol in America’s gas tanks in order to reduce dependence on foreign oil, boost job creation and promote development of renewable energy from farm-produced feedstocks. Recent Environmental Protection Agency (EPA) action approved the use of E15, a fuel blend that is 15 percent ethanol and 85 percent gasoline, up from the current 10 percent blend level.”
A news release yesterday from the American Petroleum Institute stated that, “In a conference call with reporters today, API Downstream Group Director Bob Greco discussed a new analysis of EPA’s regulations to allow higher amounts of ethanol in gasoline (E15), which showed that ‘an estimated half of all gasoline station equipment is not compatible with E15’ and said that this could result in serious safety and environmental problems for consumers:
“EPA continues to move forward with its decision to approve the use of 15 percent ethanol in gasoline, even though testing to date shows this higher concentration would not be fully compatible with much of the dispensing and storage infrastructure at our nation’s gas stations,” the release noted.
Chris Clayton noted yesterday at the DTN Ag Policy Blog that, “The Renewable Fuels Association released a statement before the API released its analysis. RFA stated, ‘Where legitimate concerns exists, such as misfueling concerns created by the partial nature of the E15 waiver, the Renewable Fuels Association has worked in good faith with all stakeholders to address these issues. The RFA has created a website dedicated to E15 information www.E15fuel.org a misfueling mitigation plan to help retailers avoid confusion, and an E15 Retailer Handbook for gas station owners seeking to offer E15.’”
Michael M. Grynbaum reported on the front page of today’s New York Times that, “Representative Louise M. Slaughter has always been a fighter. But political battles do not come much tougher than this.
“A 13-term Democrat, Ms. Slaughter has spent the last four weeks living in Strong Memorial Hospital here, rehabilitating the left leg she shattered in a fall last month. From a wheelchair, she watches as her Republican opponent meets voters and raises money.
“Ms. Slaughter has been unable to travel to Washington. She cannot visit the towns in her newly redrawn district. By Election Day, she will be 83.”
The Times article stated that, “Redistricting has left Ms. Slaughter with a new, more conservative constituency that is less favorable to Democrats than her previous district. She had one of the worst attendance records in the House last year, which she attributed to an unspecified family matter. And she is facing an energetic challenge from Maggie A. Brooks, a 57-year-old television anchor turned county executive, and the only other politician besides Ms. Slaughter who is on a first-name basis with voters in this lakefront region.”
“Strategists on both sides agree the race will hinge on Ms. Slaughter’s ability to win over her new district, which combines downtown Rochester with its surrounding suburbs and rural villages. About two-thirds of the district’s residents were not in Ms. Slaughter’s previous territory — although they know her from local TV — and Democrats, although still outnumbering Republicans in the district, now account for 40 percent of registered voters, compared with 56 percent before,” today’s article said.
Recall that Rep. Slaughter co-authored a column at Politico on Monday titled, “Antibiotic misuse a threat to public.”
Senate Agriculture Committee Member Kirsten Gillibrand (D., NY) expressed her general agreement with the Politico column in a Tweet yesterday evening where she noted that, “Agree w/@louiseslaughter, we must limit the use of antibiotics in agriculture to medical use: politi.co/JQ33AZ @US_FDA.
The ICE Dec and Mar contracts gave back 160 and 87 points on the week, respectively, as last week’s inversion between the two contracts gave way to partial carry. Well,