Keith Good: $4.8 Billion Hit to Farm Program Possible Over 10 Years

    Policy Issues

    David Rogers reported yesterday at Politico that, “Falling crop prices are raising cost projections for new farm programs even before producers have signed up this spring.

    The Congressional Budget Office weighed in this week with a revised baseline that shows annual payments to farmers could average $4.8 billion over the next decade — a nearly 50 percent increase over what CBO had predicted less than a year ago after passage of the 2014 farm bill.

    “Taxpayers will get some relief, because the same market changes that are driving up the cost of the commodity title of the farm bill will help to lessen the cost of the heavily subsidized crop insurance program. CBO’s new baseline shows a modest $200 million drop from its past projections for average yearly crop insurance costs, and some economists argue that this number understates the potential savings.”

    Mr. Rogers explained that, “The scale of these shifts is best illustrated by comparing prices from 2009 to 2013 with CBO’s new projections for the five-year life of the new farm bill: 2014 to 2018. Between the two periods, economists estimate that the average price of corn will drop by 44 percent; soybeans are projected to drop 35 percent and wheat 26 percent.

    “As a result, the two commodity support programs enacted to substitute for direct payments have jumped in cost.

    “The new ‘price-loss coverage’ plan, which had seemed inexpensive when CBO was still assuming $4-per-bushel corn prices, will cost 67 percent more now that corn is being pegged in the $3.50-per-bushel range.”

    The Politico article added that, “As it stands now, CBO is projecting that the combined annual costs of ARC and PLC will average about $4.4 billion compared with CBO’s projection of $2.94 billion for the same two programs last April.”

    Mr. Rogers indicated that, “In the past, direct payments went out regardless of crop prices even as the boom in corn drove up crop insurance costs. Now ARC and PLC are essentially countercyclical programs that go up and down with prices — and in the opposite direction from crop insurance premiums.

    “Congress is still far away from finding the sweet spot that could promise more stability for the taxpayer. But the next few years will be a real test of how much crop insurance costs will come down as a market response to the same price collapse that is driving up commodity programs.”

    And yesterday’s article noted that, “‘History shows there is a close correlation between crop prices, as represented by corn, and the total crop insurance premium and premium subsidies,’ said Keith Collins, a former chief economist for the Agriculture Department and a consultant now for the crop insurance industry. ‘So when prices drop, as over the past two years, premiums and subsidy costs fall.'”

    update yesterday from Rep. Frank Lucas (R., Okla.) indicated that, “This Friday, [Rep. Lucas] will join U.S. Secretary of Agriculture, Tom Vilsack, in El Reno to discuss the one-year anniversary of the enactment of the 2014 Farm Bill and the impact the legislation has had for farm families and the rural economy.”

    Meanwhile, Lydia Wheeler reported yesterday at The Hill Online that, “The School Nutrition Association (SNA) is lobbying to relax rules for healthy school lunches as Congress prepares to reauthorize first lady Michelle Obama’s prized Healthy, Hunger-Free Kids Act of 2010.

    “The SNA is asking Congress to give the schools funding to hire nutritionists that can plan creative, appealing menu options for kids.”

    The Hill article noted that, “‘SNA supports strong federal nutrition standards for school meals, including calorie caps and mandates to offer a greater quantity and variety of fruits and vegetables,’ SNA CEO Patricia Montague said in a statement.

    “‘However, some of USDA’s regulations under the law have unnecessarily increased costs and waste for school meal programs and caused many students to swap healthy school meals for junk food fare.'”

    statement yesterday from Tom Stenzel, President & CEO, United Fresh Produce Association, noted in part that, “While we agree with many recommendations in the School Nutrition Association’s (SNA) 2015 Position Paper, we are deeply disappointed that SNA has chosen to continue its ill-advised fight against serving kids more fruits and vegetables in schools. The requirement that kids receive one-half cup of fruits or vegetables in school meals is being successfully met by tens of thousands of schools across the country. This is a modest step for the health of our children, especially in these critical learning years. When health classes teach students to make Half Their Plate consist of fruits and vegetables, it would be unconscionable for the school cafeteria to undercut that message by not serving at least one-half cup in school meals.”

    In other developments, a news release yesterday from the True Source Honey Certification Program indicated that, “The True Source Honey Certification Program ( ) applauds special agents with U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and officers with U.S. Customs and Border Protection, for yesterday’s announcement that they have seized significant amounts of illegal honey in Houston in an ongoing effort to crack down on illegal trade in Chinese honey. Such activity threatens the U.S. honey industry – from beekeeper to packer – by undercutting fair market prices and damaging honey’s reputation for quality and safety.

    “A government news release reports that since October the special agents have seized almost half a million pounds of illegally imported Chinese honey valued at $2.45 million destined for U.S. consumers.”

    And a news release yesterday from the Senate Appropriations Committee stated that, “Chairman Thad Cochran (R-Miss.) and Vice Chairwoman Barbara Mikulski (D-Md.) today announced members for the 12 subcommittees that make up the Senate Committee on Appropriations.”

    The Appropriations Agriculture Subcommittee Chairman is Jerry Moran (R., Kan.) and the ranking member is Jeff Merkley (D., Ore.), a full list of the subcommittee can be viewed here.

    Also, a full list of the House Appropriations Agriculture Subcommittee is available here.

    In addition, a news release yesterday from the National Milk Producers Federation (NMPF) stated in part that, “The new 114th Congress will feature a large and active group of House members looking out for the interests of dairy farmers, according to the [NMPF].

    “A bipartisan group of legislators is reestablishing the six-year-old congressional Dairy Farmer caucus, and NMPF expects the new group to be even larger than the Dairy Farmer caucus in the 113th Congress.”

    Yesterday’s update added that, “The eight House members who will serve as co-chairs of the congressional Dairy Farmer caucus in the 114th Congress are: Reid Ribble (R-WI), Peter Welch (D-VT), Michael Simpson (R-ID), Joe Courtney (D-CT), David Valadao (R-CA),Timothy Walz (D-MN), Tom Reed (R-NY) and Suzan DelBene (D-WA). The bipartisan group issued an invitation to their colleagues to join the caucus this week.”


    Reuters news reported yesterday that, “Japan is prepared to cut its high import tariffs on beef and pork and slightly ease tight restrictions on rice imports for U.S. producers, in a rush to seal an ambitious Pacific trade deal, Japanese media said on Friday.”

    Yesterday’s article stated that, “Japan and the United States are working toward an agreement to cut Japan’s 38.5 percent beef tariff to about 10 percent over more than 10 years, the Nikkei newspaper said.

    “The daily, which did not cite any sources for its information, said top pork duties of 482 yen a kilogramme could be slashed to tens of yen under a new formula, while Japan would demand “safeguards” that would protect domestic producers if imports spiked.”

    Mike Lillis reported yesterday at The Hill Online that, “House Democratic leaders have a simple message for the Obama administration in its push for new trade deals: If the pacts don’t increase working-class wages, you’ve lost our support.

    “‘Don’t come to me with a trade deal that increases gross domestic product. That’s very good, but I want to see a trade deal that increases the median household income,’ Rep. Steve Israel (D-N.Y.) told reporters Thursday during the Democrats’ annual retreat in Philadelphia.’

    Susan Davis reported yesterday at USA Today Online that, “In an interview, Michigan Rep. Sander Levin, the top Democrat on the Ways and Means Committee, said the administration has not satisfied far-reaching concerns about terms in TPP affecting currency manipulation, food safety and worker protections, among other issues.

    “‘Right now, we can’t look at all the text (of TPP) and know which party is proposing what. We need to know the ‘what’ much clearer than we do now,’ he said. Levin opposes granting fast-track authority ‘until we’re comfortable’ with the terms of the deal.

    “Bringing Democrats on board could be an uphill battle for a White House with a lackluster legislative outreach operation on Capitol Hill. ‘I’m not satisfied,’ Levin said when asked about the administration’s efforts, but ‘it’s getting better.'”

    Wall Street Journal writer William Mauldin tweeted yesterday that, “‪@SenatorReid &other Democratic senators circulate petition opposing granting Obama fast-track trade authority. ‪#TPA. ‪

    And Washington Post columnist David Ignatius indicated in today’s paper that, “What’s fascinating is that China seems to be catching TPP fever as the trade negotiations accelerate. Four years ago, when the talks began, Beijing was dismissive. Chinese leaders argued that the ‘Great Recession’ showed that the United States wasn’t competent to lead the global economy, and that the TPP was just another scheme to encircle and contain the fast-growing Chinese economy.

    “You don’t hear that kind of carping now. Chinese Prime Minister Li Keqiang sounded supportive last week at the World Economic Forum in Davos, where he said: ‘We need to act along the trend of our time, firmly advance free trade, resolutely reject protectionism, and actively expand regional economic cooperation.’

    “Chinese officials go further in private, recent conversations in Beijing and Washington. They have said that China wants to negotiate membership in the TPP and, indeed, would like to join in the process of setting its rules. The Chinese are more cautious in talking with U.S. trade officials, asking instead how the process might work. But the message is clear: China sees this train leaving the station and wants eventually to be onboard.”

    Meanwhile, Sheryl Gay Stolberg reported in today’s New York Times that, “A bipartisan group of senators introduced legislation on Thursday to permanently lift all restrictions on American travel to Cuba, the first step in what will be a pitched congressional battle over how far the United States should go in expanding trade and tourism with the Communist island nation.”


    Chuin-Wei Yap reported yesterday at the China Real Time blog (Wall Street Journal) that, “China’s government has too many rules restricting the adoption of genetically modified food, and that’s ultimately hurting its long-term competitiveness in the sector, according to a leading Chinese researcher on the topic.

    “While Beijing keeps most foreign GMOs out, it is keen to develop its own genetically modified products. However, Huang Dafang, the former director of the country’s Biotechnology Research Institute – and a strong GMO advocate — says that the government is going about it the wrong way.

    “‘The approval process for GMOs is too lengthy, there are too many steps,’ Mr. Huang, also a professor at the state-backed Chinese Academy of Agricultural Sciences, said Wednesday at an industry conference.”

    Economic Matters

    Reuters writers Tom Polansek and Theopolis Waters reported yesterday that, “JBS USA, one of the top U.S. meat processors, said on Thursday it will expand a Utah beef-processing facility, even as some of its rivals have been shuttering plants because of tight cattle supplies.

    “The project is notable because the U.S. cattle herd has fallen to its smallest size since 1951, making it difficult for beef processors to find adequate supplies.

    “The company said it plans to complete the expansion in the spring of 2016. More cattle are projected to come to market by then as producers rebuild the herd.”

    The USDA’s weekly Grain Transportation Report indicated in part yesterday that, “With a record corn and soybean crop, along with a sizeable wheat crop, there have been fewer transportation issues affecting the performance of the grain transportation system to date during the 2014/15 crop year as compared to the previous year. For example, weather conditions have not interfered with traffic as they did last year at this time. All modes have been performing better than expected. The volume of rail traffic this year has been above average and barge tonnages were the highest since 2009. Ocean-vessel activity has been strong and rates have been at their lowest levels since January 2009. Diesel fuel prices have dropped to the lowest levels since 2010. However, given the USDA’s projected lower corn and wheat exports for the year and the current faster pace of soybean exports, it is likely the demand for grain transportation services could slow down during the second half of the marketing year.”


    Steven Mufson and Juliet Eilperin reported on the front page of today’s Washington Post that, “President Obama will present a federal budget proposal on Monday that would exceed restrictive spending caps mandated by Congress four years ago and propose new capital gains and bank taxes, an effort that is likely to get bogged down in congressional opposition to taxes and big budget deficits.

    “With the budget deficit down to pre-financial-crisis levels, the president will seek to obtain congressional approval for breaking through spending caps — commonly referred to as ‘sequestration’ — that he says will hurt domestic programs and undermine military preparedness, the latter a concern of many Republican defense hawks. He would set spending at a level $74 billion above the cap.

    “But the plan — which came under immediate fire from Republicans — is just the opening salvo in a battle that has become not just an annual Washington ritual but a symbol of congressional dysfunction, partisanship and poor relations between Capitol Hill and the White House.”

    Carol E. Lee and Kristina Peterson reported in today’s Wall Street Journal that, “President Barack Obama will propose government spending that is 7%–or $74 billion–over caps he and congressional Republicans agreed to in a bipartisan deficit-reduction deal over three years ago, a White House official said Thursday.”

    The Journal article also noted that, “Even before Congress can tackle bills funding the government for fiscal 2016, which begins Oct. 1, lawmakers must still deal with a bill to fund the Department of Homeland Security from Feb 27 through Sept. 30. That one funding bill was left open because Republicans had hoped to use the agency’s funding as leverage to reverse Mr. Obama’s executive action on immigration.

    “Mr. Obama is insisting lawmakers pass a clean bill funding the department without any policy riders, although the White House has left open the possibility of accepting legislation that includes some amendments.”


    news release yesterday from the Commodity Futures Trading Commission (CFTC) indicated that, “[CFTC] Commissioner J. Christopher Giancarlo today released a White Paper titled ‘Pro-Reform Reconsideration of the CFTC Swaps Trading Rules: Return to Dodd-Frank.’ The paper analyzes flaws in the CFTC’s implementation of its swaps trading regulatory framework under Title VII of the Dodd-Frank Act and proposes a more effective alternative.”

    And an update yesterday from Rep. Collin Peterson (D., Minn.) stated that, “[Rep. Peterson] today joined more than 100 members of the U.S. House to introduce the bipartisan Waters of the United States Regulatory Overreach Protection Act (H.R. 594). The legislation would prohibit the Environmental Protection Agency (EPA) and the Army Corps of Engineers from redefining ‘waters of the United States’ under the Clean Water Act. The bill would also prohibit the implementation of the interpretive rule for agriculture.”

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