Wednesday, May 23, 2012
Keith Good Farm Policy: Wild Ride Predicted for Farm Bill Process
By Keith Good
A news update yesterday from the Western Growers Association stated that, “If Congress fails to pass a farm bill this year, it could simply extend the old 2008 farm bill—a process that could leave certain specialty crop programs that don’t have permanent funding in flux. That’s according to U.S. House Agriculture Committee Chairman Frank Lucas (R-Okla.) who was in Irvine at the Western Growers headquarters today to visit with farmers.
“‘There is a high probability one way or another that we’ll see an extension of the 2008 farm bill,’ Lucas told the group. His committee is under pressure to cut at least $33 billion from the federal farm legislation. That, combined with the current political climate and upcoming presidential election could stall the farm bill in the political process.”
Yesterday’s update added that, “Programs like the Specialty Crop Research Initiative, which helps fund research and innovation in the specialty crop industry, is one of those programs that doesn’t have permanent funding. Lucas said his committee would essentially have to strategically find funding for it.
“‘It’s a wild ride ahead of us,’ Lucas said.”
Meanwhile, Mike Christopherson reported yesterday at the Crookston Daily Times (Minn.) Online that, “Although the U.S. House and Senate versions of the 2012 Farm Bill are different in a fairly significant way, Seventh District U.S. Rep. Collin Peterson (D-Minn.) remains confident that a compromise bill can be hammered out by early August.
“‘There are a lot of things in the bills that everyone is pretty happy with,’ Peterson said in a conference call with reporters prior to his farm bill update meeting in UMC’s Youngquist Auditorium Monday. ‘But the Senate decided to get rid of the target price concept and counter-cyclical payments in favor of a revenue average crop payment system.’
“That’s not popular in the House, he added. Two days of recent hearings in the House resulted in essentially unanimous opposition to eliminating the target price system and counter-cyclical payments. ‘We think it’s a mistake,’ Peterson said. ‘It’s not a partisan difference of opinion, either, but a philosophical difference that’s rooted a little bit in geography, too.’”
The article added that, “The opposition in the House boils down to ‘managing farm programs based on good times,’ which Peterson said is what the Senate commodities proposal does. ‘We need to be concerned about bad times and bad prices, which we know will come at some point,’ he said. ‘It’s a mistake to take out price protection.’
“He said he’s heard from the Senate that farmers will change what they plant if the target price/counter-cyclical payment system goes away. But Peterson said that’s not what he’s hearing from growers in his district. ‘I haven’t talked to one farmer that’s backed that up,’ he said. ‘They say it’s (target price, counter-cyclical payment) the fourth or fifth thing they consider when deciding what to plant.’”
On Monday, a local television news report from WDAZ (Grand Forks, ND) included coverage of Rep. Peterson’s visit with constituents on Farm Bill issues, “Rep. Collin Peterson Outlines Likely Cuts to Farm Bill.”
In related analysis, an update posted yesterday at the farmdocDaily blog by University of Illinois Agricultural Economist Gary Schnitkey (“Net Returns with ARC under Differing Price Scenarios”) stated that, “Agricultural Risk Coverage (ARC) is a revenue-based, proposed Farm Bill program passed by the Senate Agriculture Committee. In this post, net returns for corn are examined using prices and ARC payments detailed in a May 9, 2012 post here. At $4.00 per bushel and below corn prices, ARC will make payments, aiding in cushioning revenue losses. However, ARC payments are not large enough is assure profits, as farmers who cash rent will face losses at prices below $4.00 per bushel.”
Dr. Schnitkey added that, “In general, returns to corn and soybean farms have been above average in recent years because of relatively high corn prices. U.S.D.A. reports average national prices at $5.24 per bushel for the 2010 marketing year and projected $6.10 for the 2011 market year. Given recent increases in production and land costs, a $4.50 corn price will result in much lower returns than 2010 and 2011 prices. Prices below $4.00 will result in losses for corn production.
“ARC will provide payments that cushion low revenues. ARC payments will not cover the entire decline in revenue because of the structure of the ARC program; hence, losses are possible with ARC. This occurs because ARC will not make payments until revenue has declined 11% from its benchmark revenue, then only a portion of the losses will be covered for the next 10 percent decline in revenue.
“If a string of low prices over several years occurs, ARC will make larger payments in the beginning years. These payments then will decline through time. These payments will allow farmers to adjust to lower prices. Moreover, costs likely would adjust down to a lower price. For example, cash rents likely would decline in an extended period of low prices occur. Hence, ARC can be viewed as a transition program designed to aid farmers by cushioning revenue from market changes, ARC will not establish a permanent level of support around a specific price or revenue.”
A news release yesterday from Marcia L. Fudge (D., Ohio), the Ranking Member of the House Agriculture Subcommittee on Department Operations, Oversight, and Credit, stated that, “As the House of Representatives prepares to consider reauthorization of the Farm Bill, [Rep. Fudge] will visit a Northeast Ohio dairy farm on May 23rd. She will meet with traditional and non-traditional farmers as well as feeding stakeholders. The Farm Bill Listening Session is hosted by the Ohio Farm Bureau Federation, the Farm Credit Council and the Cleveland Foodbank. This event will give agricultural stakeholders in Ohio, including urban farmers as well as providers of food for the needy, an opportunity to make recommendations.”
A news release Monday from House Ag Committee Member Tim Walz (D., Minn.) indicated that, “Today, Congressman Tim Walz toured Trout Run and Pickwick Creek in southeast Minnesota to encourage conservation practices in the new Farm Bill that will provide protection to our natural state treasures and keep our waterways and wildlife habitats clean and secure.
“‘Minnesota’s immaculate waterways and wildlife habitat are some of our most valued state treasures and enhance the quality of life for many sportsmen and women. Future generations deserve peace of mind in knowing that they will have the opportunity to enjoy these natural treasures as well,’ said Walz, a lifetime member of Pheasants Forever.”
In related news, an update yesterday from USDA stated that, “Agriculture Secretary Tom Vilsack today announced that USDA’s Natural Resources Conservation Service (NRCS) and its partners will invest nearly $32 million this year in financial and technical assistance for five water quality and wetlands improvement projects in seven Mississippi River Basin states. When fully implemented, the projects will prevent sediment and nutrients from entering waterways, decrease flooding and improve bird and fish habitat. NRCS estimates that this investment will restore 11,400 acres to wetland habitat.”
Also on the conservation issue, an opinion column by Bob Benson, the president of the Bethesda Chevy Chase Chapter of the Izaak Walton League of America, which was posted yesterday at the Baltimore Sun Online, stated that, “One of the most significant ways we can protect our nation’s clean water, land and wildlife habitat is for Congress to close the loophole exempting farm operators who receive federal crop insurance from agreeing to basic stewardship practices. Our organization urges Maryland’s congressional delegation to provide strong conservation leadership and work to ensure that farm operators who accept crop insurance payments also agree to implement conservation practices on their lands. In 1996, a conservation compliance loophole was created for crop insurance. It’s time to close that loophole.”
More specifically with respect to crop insurance issues, a news release yesterday from National Crop Insurance Services [NCIS] stated that, “As the House Agriculture Committee wraps up its hearings and the Senate Farm Bill moves closer to the floor for debate, [NCIS]today released the third in an ongoing series of educational videos on crop insurance. This new video spotlights the Missouri river flooding of 2011 – a months-long flooding event – that brought historic damage and destruction to farms in several states.
“The video, titled ‘2011 Midwest Case Study,’ contains an overview of the record flooding by NCIS President Tom Zacharias, highlighting the extended duration of the flood and the destruction it inflicted to America’s breadbasket. Additionally, Ruth Gerdes, a farmer and crop insurance agent from Auburn, Nebraska, who had several clients whose farms were totally destroyed, gives some insight into the human side of the event and explains how farmers were able to bounce back and resume crop production the next year.”
Meanwhile, an update posted yesterday at the Economic Research Service (ERS- USDA) Charts of Note webpage stated that, “Three key features of U.S. agriculture highlight the importance of family farms. First, small family farms (those with less than $250,000 in annual sales) make up 88 percent of all U.S. farms. Second, large-scale family farms—about 10 percent of all farms—account for a disproportionately large, 72-percent share of the value of production. Third, farming is still an industry of family businesses. Nearly 98 percent of farms are family-owned, and they account for about 88 percent of production. Just over 2 percent of U.S farms are nonfamily farms, accounting for the remaining 12 percent of production. This chart is an update of one found in the ERS report, Structure and Finances of U.S. Farms: Family Farm Report, 2010 Edition, EIB-66, July 2010.”
Also yesterday, ERS released a report, “The Potential Impact of Changes in Immigration Policy on U.S. Agriculture and the Market for Hired Farm Labor: A Simulation Analysis,” which noted that, “Large shifts in the supply of foreign-born, hired farm labor resulting from substantial changes in U.S. immigration laws or policies could have significant economic implications. A computable general equilibrium (CGE) model of the U.S. economy is used to evaluate how changes in the supply of foreign-born labor might affect all sectors of the economy, including agriculture.”
In other policy related news, an update yesterday at Feedstuffs Online reported that, “The United Egg Producers (UEP) launched a new website today as an informational site to promote the passage of federal legislation that would establish a national standard for hen housing in the egg industry.
“The site, www.eggbill.com, provides information to help legislators, consumers, foodservice and retail executives and others learn more about the legislation, which would codify an agreement between UEP and The Humane Society of the United States (HSUS) that would transition egg production in the U.S. from conventional cages to enriched colony cages by the end of 2029, according to the announcement.”
And Reuters news reported yesterday that, “The U.S. Agriculture Department will seek public input before it considers changing the release times of market-moving reports on farm data now that futures markets are open nearly around the clock, Agriculture Secretary Tom Vilsack said on Tuesday.
“‘This is a complicated issue,’ Vilsack told a telephone news conference, adding the department wanted to assure equitable release of information for all market participants.”
Ken Anderson reported yesterday at Brownfield that, “Ag Secretary Tom Vilsack says the USDA is studying its procedures for releasing crop reports in response to new expanded trading hours implemented by the CME Group.
“But Vilsack says changing report release times is not as simple as it sounds.”
A report yesterday from ERS, “The 2008-09 Recession and Recovery Implications for the Growth and Financial Health of U.S. Agriculture,” indicated that, “U.S. agriculture was better positioned than most United States industries entering the recession, was less affected by the recession than most other industries, and is well positioned to continue to do well as the economy recovers.”
Meanwhile, Bloomberg writer Jeff Wilson reported yesterday that, “Corn fell the most in more than four months and soybeans declined to the lowest in seven weeks on speculation that rain will improve prospects for newly planted crops in the U.S., the world’s biggest producer and exporter.”
Alexandra Wexler reported yesterday at The Wall Street Journal Online that, “Raw-sugar futures tumbled below 20 cents a pound for the first time since September 2010 as Brazilian exporters sold sugar to take advantage of a weaker real versus the U.S. dollar.”
Also, the AP reported today that, “While the number of dairy cows in the U.S. hasn’t changed much, the number of dairy farms has been dropping as small farms either go out of business or consolidate to become more competitive and cost effective.
“The number of dairy farms nationally has dropped from nearly 92,000 in 2002 to less than 70,000 in 2007, according to the last agricultural census, which is being updated this year.
“That’s not the whole picture though. The number of small farms, with 100 to 199 cows, fell from about 11,000 to about 9,000 during that time, while those with more than 1,000 cows grew from about 1,300 to almost 1,600.”
The AP article added that, “The farm closures are likely to continue with milk prices expected to keep falling this summer.”
Carl Hulse reported in Tuesday’s New York Times that, “[Speaker John A. Boehner] took fellow lawmakers and the White House by surprise last week when he indicated a willingness to plunge back into the fight that devoured much of 2011. It didn’t end well for either side when the government bond rating was downgraded, the image of Washington took a beating and a subsequent special Congressional debt committee flopped. The result requires a $500 billion cut in Pentagon spending that Republicans are now trying to wriggle out of.
“On Sunday, Mr. Boehner said he was ‘not going to apologize for leading’ by restarting the debate on the debt limit.”
Mr. Hulse noted that, “Because of the failure of the special debt committee, the Pentagon is facing steep reductions over the next decade under what is known as a sequester. Even though many of them backed the budget agreement, Republicans and some Democrats argue that those cuts are too deep and could not only weaken the military but might lead to significant job losses around the county if contractors are forced to lay off workers.
“But the dirty little not-so secret on Capitol Hill is that many Democrats prefer those cuts — tough though they might be to swallow — compared with the alternative: offsetting another increase in the debt limit with even more cuts in domestic programs without some new tax dollars.
“As a result, there is no way Democrats are going to sign off on any proposal that would raise the debt limit, extend Bush-era tax cuts and jettison the sequester without finding new revenue, preferably through higher taxes on the most affluent Americans.”
Damian Paletta reported in today’s Wall Street Journal that, “The U.S. economy will likely fall into recession in the first half of 2013 if large tax increases and scheduled government spending cuts are allowed to go into effect in January, theCongressional Budget Office said Tuesday.
“The nonpartisan agency’s finding could ramp up pressure on policy makers to reach a broad budget deal later this year to avoid such an outcome.”
Meanwhile, Meredith Shiner reported yesterday at Roll Call Online that, “Senate Majority Leader Harry Reid (D-Nev.) indicated that he does not see a way to reach bipartisan agreement on deficit reduction or taxes before the November elections.
“Reid, in a terse letter, was responding to a letter signed by 41 Senate Republicans that demanded immediate action on extending Bush-era tax cuts that expire at the end of this year.
“In his letter, Reid suggested that the GOP Senators’ concerns were not legitimate unless they agreed to compromise on a deficit reduction package that includes tax increases on the wealthy and corporations.”
Bloomberg writer Brian Wingfield reported yesterday that, “U.S. and European Union negotiators should focus on issues where economic relations can be improved immediately before they begin talks on a broad trade agreement, the U.S. trade ambassador said.
“‘Our mutual, urgent needs to enhance growth and employment compel us to identify a short path to success before we launch these negotiations,’ U.S. Trade Representative Ron Kirk said today in a speech in London.
“The U.S. and 27-nation EU, which have the world’s largest bilateral economic relationship, are considering ways to lower trade barriers after the worst economic crisis since the Great Depression. Negotiators led by Kirk and EU Trade Commissioner Karel De Gucht are set to issue a progress report next month.”
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