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    Friday, February 15, 2013

    Keith Good: Senate Ag Hearing — Drought, Fire and Freeze

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    Reuters writer Charles Abbott reported yesterday that, “U.S. farmers will plant crops this spring under the shadow of a persistent drought that grips prime farmland from the Mississippi River to the Rocky Mountains, with grain supplies already tight from drought losses in 2012.

    “In all, 56 percent of the contiguous United States is under moderate to exceptional drought, twice the usual amount, the Senate Agriculture Committee was told on Thursday.”

    The article noted that, “‘In fact, we are forecasting drier conditions,’ said Roger Pulwarty, director of the National Integrated Drought Information System, a federal agency [prepared testimony here] . Above-normal rainfall benefited the southern Plains at the start of this year.”

    “Some 59 percent of winter wheat was under drought conditions, said Joe Glauber, Agriculture Department chief economist [prepared testimony here]. ‘While that also implies that spring planting may be affected by drought conditions as well, there have been improvements in the eastern Corn Belt, where many areas are no longer experiencing drought.’

    “With adequate rainfall during the growing season, U.S. yields will rebound to normal levels, leading to bumper corn and soybean crops. In turn, commodity prices would fall as near-empty grains bins are filled. The corn stockpile is expected to be smallest in 17 years by harvest-time this year,” the Reuters article said.

    Bloomberg writer Alan Bjerga reported yesterday that, “Livestock producers, who thinned herds to avoid rising feed costs, continue to experience hardships, Glauber said. About 69 percent of cattle-producing areas and 59 percent of hay acreage remain in drought conditions, with rain needed to allow ranchers to rebuild their operations.”

    Chris Clayton reported yesterday at DTN (link requires subscription) that, “‘Thanks to our successful crop insurance program, many farmers will be able to recover from their losses,’ said Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich. ‘For those farmers who didn’t have access to crop insurance, or who relied on risk management tools that would have been included in the farm bill, the future is less certain’” [opening statement from Chairwoman Stabenow here].

    Mr. Clayton added that, “Leon LaSalle, a rancher board member for the Montana Stockgrowers Association, said ranchers always had to wait for an ad-hoc disaster bill until 2008 when a livestock disaster program was included in the farm bill. That program, however, expired just before the 2012 drought hit.

    “‘There is no insurance for catastrophic livestock losses such as those experienced by southeastern Montana ranchers during the horrific wildfires of 2012,’ LaSalle said.”

    Senator Max Baucus (D., Mont.) elaborated on the importance of disaster assistance for livestock producers and the benefits that program certainty brings to ranchers at yesterday’s hearing- audio (MP3- 2:28).

    Mr. Clayton pointed out that, “Jeff Send, a cherry producer from Michigan, talked about the destruction he and other cherry farmers faced last year in the state. Michigan cherry producers have the potential to grow as many as 275 million pounds of tart cherries, but last year farmers grew only 11.6 million pounds. In 2011, Send and other farmers would have qualified for the Supplemental Revenue Assistance Program, but it had expired.”

    More specifically on crop insurance, Dr. Glauber, the USDA’s Chief Economist, indicated that, “It made a very big difference.  Now, let’s go to the flip side.  If you were underinsured, if you weren’t insured, then you were looking at yield losses.  And particularly for some specialty crop producers, where the participation rates tend to be lower, or there may not be anything other than noninsured acreage, the disaster programs—and we know, for example, in your area, Pennsylvania, New York, because, as you mentioned, the warm early spring, a lot of the tree crops flowered and then were hit with a devastating freeze.  And again, if you were insured, you’ll get some compensation there, but if not, you were facing some serious losses.”

    The sequestration issue also came up at yesterday morning’s hearing.

    Sen. Thad Cochran (R., Miss.), the Committee’s Ranking Member, indicated that, “Sequestration is a word we’re all still trying to figure out how you define, and what the practical consequences of that are.  I think it shifts more responsibility to the administration than they’re accustomed to having.  Usually Congress specifies levels of appropriation for government program funding and that’s carried out.

    “And I can remember when—I think it was maybe one of the Nixon administrations—where they came in and impounded funds, and everybody in Congress threw up their hands in holy horror, ‘My gosh, we directed that this be spent.  This is mandatory spending.’  So we contrive these things that tell the administration in no uncertain terms this is money that’s to be spent.  It’s appropriated and it’s mandated; spend it.

    “What’s your reaction to that in this environment?  Have things changed?  Are we going back to government impoundment?  And when do we know about it?  How are you going about identifying those programs that are going to have the funds impounded, or sequestered, the new word?”

    Dr. Glauber responded by noting that, “Well, thanks.  I remember not so fondly the days of Gramm-Rudman, and the cuts that went in place back in the ‘80s.  Again, as I mentioned, my understanding, at least, the Secretary’s been working with OMB on what qualifies, at least under the mandatory spending, what would be subject to sequestration.  Obviously there’s some accounts that won’t be because of contractual relations and other things, and then others that at least the lawyers feel that they do have authority to sequester.  I can get back with you on that.  I agree with you in your point that the sooner the better this is made known.  People have to make planning decisions.  I understand.”

    Later, Sen. Pat Roberts (R., Kans.) noted that, “But what is considered mandatory and discretionary is going to be exceedingly important to farmers out there, and you know which programs we’re talking about.  So I think Senator Cochran really hit the nail on the head, and if we can get that information to all of us, that would be helpful.”

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