Keith Good Farm Policy: House Ag Committee Pushes Target-Price Program
Farm Bill Developments
DTN Ag Policy Editor Chris Clayton reported yesterday that, “After two days of blasting holes in the Senate Agriculture Committee farm safety net, House Agriculture Committee leaders have made it clear they want a target-price program for farmers. [Prepared testimony from the House hearings from Wednesday and yesterday can be viewed here and here].
“A House Ag Subcommittee repeatedly examined how the Senate safety net, the Agriculture Risk Coverage program, or ARC, would work with insurance, or not work at all depending on the commodity or region. The best option going forward is an alternative program that offers farmers a target price for crops.
“To satisfy farmers in various regions and commodities, a target price program would likely have to increase the prices for at least some commodities from the current counter-cyclical program target prices. Farmers now lament that the current counter-cyclical target prices are well below the cost of production.”
Mr. Clayton pointed out that, “Then there is the question of whether a new target-price program would pay farmers based on traditional base acres. Groups such as the American Soybean Association, raising concerns about planting distortions, say that would avoid target prices affecting the market. At least some lawmakers dismissed that argument.
“‘If we’re going to do a target price program, it’s not going to be tied to base acres,’ said House Ag Ranking Member Collin Peterson, D-Minn. ‘It’s going to be tied to planted acres. And I have yet to find a farmer in my district that says people are going to change their planting because of the target price, the way it was in the supercommittee bill.’
“House Agriculture Committee Chairman Frank Lucas, R-Okla., noted farmers in one of the major soybean-producing counties in his district are planting soybeans on wheat base acres. They are drawing $16 an acre in direct payments. Under the Senate proposal, the most that would be paid to those farmers, regardless of how far soybean prices fall, would be $18 an acre.”
The DTN update noted that, “Rep. Steve King, R-Iowa, asked the panel if compliance with conservation were a principle, should it be tied to commodity programs or crop insurance. Other than [National Farmers Union President Roger Johnson], farmers and insurers testifying saw no need to tie compliance to insurance.”
A news release yesterday from the National Farmers Union noted in part that, “‘The farm bill passed by the Senate Committee on Agriculture contained a number of positive aspects, but one thing that it did not include was a way to deal with a long-term commodity price collapse,’ said Johnson.”
Daniel Looker reported yesterday at Agriculture.com that, “Members of several farm groups told a House Agriculture subcommittee Thursday that they support giving producers choices of commodity programs in the next farm bill, instead of the approach taken by the Senate Agriculture Committee to rely mainly on a shallow loss revenue programs.
“Eric Younggren, a Hallock, Minnesota farmer who is president of the National Association of Wheat Growers told the committee that his group supports a revenue program modeled after the 2008 Farm Bill’s ACRE and SURE progams. But when asked by Agriculture Chairman Frank Lucas (R-OK) if his group supports other options, Younggren said the Wheat Growers recognized that other parts of the country have different needs.
“American Soybean Association president Steve Wellman of Syracuse, Nebraska, said that after two years of developing policy with soybean farmers across the country, his group decided to back a revenue program in the 2012 farm bill. The group supports the Senate committee’s new Agriculture Risk Coverage program. But he, too, told the committee that his group does not oppose other programs as long as they don’t distort farmers’ planting decisions.”
An update posted yesterday at the National Sustainable Agriculture Coalition blog noted that, “The debate over the direction of the commodity subsidy system is likely to result in two different approaches in the House and Senate farm bills that will then have to be negotiated and compromised in a House-Senate conference committee later in the farm bill process. While it is quite possible to include both programs and make them separate options for producers to choose between, doing both within the farm bill budget constraints will necessarily mean both programs would offer less protection than would be afforded if there were a single, unified program.”
In a statement released yesterday, Rep. K. Michael Conaway, Chairman of the Subcommittee on General Farm Commodities and Risk Management, indicated that, “”When we began the Farm Bill process last year, I indicated that I would use five guidelines to judge any farm bill proposal, based on what I heard from farmers in my district and across the country.
“First, would the farm bill undermine crop insurance? Second, is the farm bill bankable to farmers and lenders? Third, is the farm bill tailored to producer risk? Fourth, are all crops, farmers, and regions treated equitably? And, fifth, can farmers and their lenders understand it?
“The clear message from the hearing, and from farmers, lawmakers, and economists alike, is the Senate Ag Committee’s farm bill fails these tests. If prices collapsed, the Senate Farm bill would collapse right along with them, creating a crisis in farm country and calls for expensive ad hoc assistance in Washington. Calls that cannot be answered because the government is broke. The Senate bill also creates a complicated new program that is so lopsided it actually locks in profits for some while denying any safety net at all to others; it would distort planting decisions while duplicating and competing with crop insurance. In short, the Senate farm bill fails farmers and taxpayers, and it will not become law.”
An update yesterday from National Crop Insurance Services (NCIS) stated that, “Crop insurance has become the powerful risk management tool that Congress designed it to be, garnering widespread support from all segments of agriculture, banking and most importantly, farmers, said Ruth Gerdes during her testimony today to the House Subcommittee on General Farm Commodities and Risk Management.
“‘The growth of Federal Crop Insurance is an outstanding success story,’ said Gerdes, president of The Auburn Agency Crop Insurance Inc., farmer and crop insurance agent from Auburn, Nebraska. Gerdes explained that from the time the modern public/private partnership was forged in 1980, the program has grown ‘from an insignificant nuisance among farm programs covering less than 12 percent of the nation’s cropland to a robust program covering 83 percent of all cropland acres and providing bankable protection to America’s best, most dynamic and most productive farm families.’”
The NCIS update added that, “Former USDA Chief Economist Keith Collins told the subcommittee that ‘the expanding role of crop insurance in the farm safety net signals several key features that farmers and policymakers find attractive.’ Collins explained that these include the requirement that a producer has to consciously elect to manage risks, the availability of insurance plans that can be designed to fit individual farm risks, the idea that producers share in the program costs, and accountability that comes with cost sharing.
“‘In addition, the private sector delivers the program as part of a public/private partnership that involves risk sharing between the government and the private companies,’ he said.”
A news release on Wednesday from the National Cotton Council (NCC) indicated that, “NCC Chairman Chuck Coley, in testimony before that Committee’s General Farm Commodities & Risk Management Subcommittee here today, emphasized that even with budget constraints and trade concerns, it is critically important that new farm law provide certainty to those involved in production agriculture because ‘they make long-term investment decisions based in part on federal farm policy.’
“The Georgia cotton producer testified that the U.S. cotton industry faces the unique challenge of resolving the World Trade Organization (WTO) dispute with Brazil.
“‘In developing new farm legislation, the U.S. cotton industry pledges to work with Congress and the Administration to resolve the Brazil WTO case and remove the imminent threat of retaliation against exports of U.S. goods and services,’ he stated.
“Coley told the panel that in light of budget constraints and trade considerations, the U.S. cotton industry recommends a revenue-based crop insurance program available for voluntary purchase — which will strengthen growers’ ability to manage risk. By complementing existing products, the program would provide a tool for growers to manage that portion of their risks for which affordable options are not currently available. He added that the revenue-based crop insurance safety net would be complemented by a modified marketing loan that is adjusted to satisfy the Brazil WTO case.”
Meanwhile, the Coalition for Sugar Reform noted in a news release yesterday that, “The House Agriculture Committee Subcommittee on General Farm Commodities & Risk Management will wrap up two days of Farm Bill hearings today without consideration of the costly U.S. sugar program. Proponents of sugar program reform – which provides special treatment to U.S. sugar growers at the expense of U.S. consumers and workers – expressed concern that the House is on track to follow the Senate Agriculture Committee’s lead, and rubber stamp the outdated and anticompetitive program.”
Yesterday’s release added that, “Representatives Joe Pitts (R-PA) and Danny Davis (D‐IL) submitted joint written testimony, stating:
“‘Left unchanged, the current sugar program will continue to hurt American workers by overly restricting the supply of sugar in the U.S. market, thereby excessively driving up the cost of domestic sugar and encouraging the relocation of good American manufacturing jobs to Canada, Mexico, and other foreign countries.
“‘Left unchanged, the current sugar program will continue to hurt American consumers by increasing the price of every product made with sugar.’”
In other Farm Bill news, an update yesterday from Rep. Adrian Smith (R., Neb.) noted that, “‘A responsible Farm Bill is essential to keep Nebraska’s vibrant agricultural economy strong,’ said Smith, who has hosted eight listening stops across the Third District on the upcoming reauthorization. ‘Our nation is currently facing record-high deficits, requiring difficult decisions, and I commend producers for their forward thinking. A workable Farm Bill which builds on the success of the crop insurance program will provide our farmers and ranchers the certainty they need to continue feeding America and the globe. I look forward to continued input from Nebraskans as the House bill takes shape.’”
University of Illinois Agricultural Economist Nick Paulson indicated yesterday at the farmdoc daily blog (“Annual Payment Limits for the ARC Program and Farm Size in Illinois”) that, “The Farm Bill recently passed by the Ag Senate Committee proposes to replace the Direct, Counter-cyclical, and ACRE programs with a crop-specific revenue program called Ag Risk Coverage (ARC). Details about the ARC program have been provided in recent posts (here and here). Today I will focus on the proposed $50,000 limit on total payments for ARC and what types of grain farms might be affected by this limitation using some Illinois county examples. These examples show that payment limitations could affect a significant number of grain farms if ARC payments are triggered over the next Farm Bill period. Furthermore, since larger payments are triggered during periods of greater revenue losses, payment limits will tend to be met for smaller operations during periods when support is, arguably, most needed.”
Dr. Paulson noted at the conclusion of his analysis yesterday that, “The Senate Ag Committee’s 2012 Farm Bill includes some major changes to the Commodity Title, including the introduction of the revenue-based ARC program which would replace most existing commodity programs. ARC protects against declines in farm revenues relative to a historical average benchmark revenue level, providing coverage against events not covered by crop insurance such as declining prices across multiple years.
“The proposed payment limitation for ARC program payments has been set at $50,000 at the farm entity level. The analysis of three Illinois county examples has shown that, on average, this payment limitation would likely impact farms with more than 4,000 to 5,000 acres planted to corn and soybeans if ARC payments are triggered.
“However, the historical analysis also shows that approximately 50% of the years in which ARC payments are made on corn and/or soybean acres would result in payment limits being met for farm sizes in the range of 1,500 to 2,000 planted acres. This occurs in years where large payments are triggered from the ARC program. Years in which large ARC payments are made indicate periods of large declines in revenue relative to the benchmark, implying that the ARC payment limitation will tend to affect smaller operations during periods of greater financial stress.”
With respect to nutrition issues, The New York Times editorial board indicated today that, “In January, Gov. Andrew Cuomo promised to end fingerprinting of people who apply for food aid in New York State. On Thursday, he finally proposed the regulations that can make that happen.
“Five years ago, the state stopped requiring fingerprinting for food stamp recipients. But at Mayor Michael Bloomberg’s insistence, it allowed New York City to continue to do so. After a 45-day comment period, the city will be forced to stop this stigmatizing process that deters struggling families from getting the help they need. Now Mr. Cuomo needs to push legislators to end fingerprinting for welfare applicants, which is still required by state law.”
The Times added that, “Some 1.8 million people in New York City receive food stamps. But, as Mr. Cuomo noted, 30 percent of New Yorkers statewide who are eligible for food stamps, or 1.4 million people, are not receiving them. That leaves more than $1 billion in federal dollars unclaimed for people who would spend that money in the state.
“Mr. Bloomberg should end the fingerprinting requirement immediately, and start making it easier for his constituents to get food aid.”
Meanwhile, McClatchy writer Michael Doyle reported yesterday that, “Farm bill dollars – and disagreements – traditionally focus on subsidies for crops such as wheat, cotton, corn and rice. That’s still the case this year, as Congress approaches a Sept. 30 deadline for rewriting the 2008 farm bill. Tens of billions of dollars are on the line.
“But for fruit and vegetable growers, and others lumped under the specialty-crop category, federal farm bills offer new significance and new seductions. The 2008 bill broke fresh ground; including, depending on how the money is counted, upward of $3 billion aiding specialty crops. Now the unsubsidized industry that once touted its independence is lobbying hard to hold on to what it has.
“‘We went into the 2007-2008 farm bill trying to get equity for specialty crops,’ said Rep. Dennis Cardoza, D-Calif. ‘We got out of that bill what we needed to; now we’re fighting from a different place than we were before.’”
Mr. Doyle explained that, “The 2008 farm bill, passed over President George W. Bush’s veto, recalibrated assumptions for specialty-crop growers and lawmakers alike. The lawmakers are starting from a different baseline this year: The question isn’t whether to include specialty crop programs, but at what funding level. Or, as Cardoza put it sardonically, ‘The Midwest folks would love to steal our money back.’
“The growers, in turn, must entangle themselves in a political world that some once shunned. This week, for instance, the California Farm Bureau Federation and the Western Growers Association sent delegations to Capitol Hill. A Specialty Crop Farm Bill Alliance has rallied more than 140 like-minded organizations to press the case over many months.
“‘We want to make sure that the money that’s really important (for us) is still part of the farm bill,’ California Farm Bureau Federation President Paul Wenger, an almond and walnut grower from Modesto, said Thursday. ‘Everything is going to be trimmed a little … (but) we won’t give up what we got.’”
John Stanton reported yesterday at Roll Call Online that, “Speaker John Boehner this morning renewed his vow to connect another debt ceiling increase to cuts to federal spending.
“During a speech at the Federal Policy Group’s 23rd annual policy meeting, the Ohio Republican said bluntly, ‘I’ve gotten a lot of criticism over the last couple of days because I’ve made it clear we should start dealing with our debt now.’ Since Boehner articulated his position in a Tuesday speech at the Peter G. Peterson Foundation, the reaction has ranged from incredulity from the administration and Congressional Democrats to nonplussed from many conservative Republicans.”
The Roll Call article added that, “‘I sort of drew a line in the sand, threw down the gauntlet,’ Boehner said, employing the most commonly used descriptors of his position that it is more important to cut spending than to ensure that the federal government has flexibility to finance its programs.
“‘Inaction in my view is not an option,’ he added.
“Boehner also said he intends to continue the GOP’s push to curb regulatory activities by the Obama administration.”
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,