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    Ag Banker Expects Negative Cashflow; Rumors: Budget Hawks Keep Eyeing Crop Insurance – Keith Good

    Former House Ag Committee Chairman Larry Combest (R-Texas) indicated in a column yesterday at The Hill Online that, “One banker from a farming state

    that made better yields than most in 2014 paints a bleak picture. He told me that but for crop insurance, sharply pared back capital investments and the potential for help under the farm bill, most producers would negatively cash flow for 2014 and 2015. Machinery sales are minimal and land sales often end with no sales. About 10 percent of producers are in serious financial trouble and that number will grow unless prices recover.

    “Now, imagine what bankers are saying in states making substandard yields, some experiencing severe drought over multiple years where there has been no opportunity for producers to build up reserves. Despite their best efforts to restructure producer debt, liquidations are beginning. Producers are going under, and the first to go are young producers in debt with no equity.

    “Yet despite the shaky financial ground producers find themselves on, the administration last month unveiled a budget that proposes to shake it up even more with a plan that targets a key element of crop insurance, threatening the ability of many farmers to manage risk through forward contracting. And this month, congressional budget committees may put forward plans to further disorient producers and lenders already reeling from plunging markets and complex farm bill decisions.”

    The column noted that, “If this latest round of messing with the farm bill and crop insurance somehow succeeds, we could see a very serious deterioration of the farm economy, something most policymakers today have not witnessed while in office. But even if the efforts fail, the mere talk of it adds confusion and anxiety for producers and casts further doubt in the minds of lenders.”

    Yesterday, the “Washington Insider” section of DTN (link requires subscription) indicated that, “For some time, there has been a growing buzz about how the

    coming budget wars would affect the implementation of the 2014 farm bill. Senate Budget Committee Chair Mike Enzi, R-Wyo., recently drew press attention with the comment that his committee’s upcoming budget resolution likely will include instructions for reconciliation — along with follow-on legislation for spending cuts designed to be immune from a Democratic filibuster.

    The reconciliation process lets Congress set an overall goal for cuts, and then require the authorizing committees to do the work — that is, choose where actual cuts are to be made through legislation. The process identifies the committee tasked with reporting legislation, the spending, revenue or deficit targets and the deadline for reporting a bill. Such resolutions do not require the president’s signature.

    “A key focus of the rumors is the effect the expected proposals are likely to have on social programs, especially Medicaid and food stamps. But, there also is talk about the need for attention to commodity programs, coming from both bureaucrats and budget hawks. For example, the Government Accountability Office recently released a report that noted some ‘crop insurance savings’ that GAO thought ‘could be timely.'”

    The DTN update also noted that, “While it seems likely that the current majority in Congress will dig deeply into the management and effectiveness of the food stamp program, it is not clear whether the budget hawks will be able to impose budget trims on the commodity programs, as well. However, the cost comparison between the new insurance programs and the unpopular direct payments could gain traction in the coming debate.

    “The fights over social programs are well known by now and those in the offing likely won’t be much different. Any significant cuts proposed by the majority will be bitterly opposed by Democrats. And, if discord erupts over panel recommendations, most expect a contentious floor fight with dueling amendments when the FY 2016 Ag appropriations bill that includes food stamps reaches the floor in both chambers.

    Whether the budget hawks will choose to focus on the new farm programs’ substantial costs remains to be seen. However, the fact that they could be even more expensive than the direct payments that were too unpopular to even consider reauthorizing could attract attention as the budget fight intensifies over the coming months, Washington Insider believes.

    The Washington Post editorial board opined on Monday that, “Yes, the old system of direct payments to growers of corn, soybeans and a few other crops have been

    replaced by two heavily subsidized ‘insurance’ programs that ostensibly protect only against price swings and natural disasters beyond the farmers’ control. In fact, though, the programs insure against such relatively common risks that they are tantamount to direct payments, and nearly as lucrative — sometimes more so.”

    In other policy news, an update yesterday from the Senate Ag Committee stated that, “A key, bipartisan group of four senators today requested a 30-day extension of the public comment period for the 2015 Dietary Guidelines Advisory Committee’s (DGAC) Scientific Report. Chairmen Pat Roberts, R-Kan., and Lamar Alexander, R-Tenn., joined Ranking Members Debbie Stabenow, D-Mich., and Patty Murray, D-Wash., in sending a letter requesting the extension to U.S. Secretary of Agriculture Tom Vilsack and to U.S. Secretary of Health & Human Services (HHS) Sylvia Burwell.”

    A news release yesterday from USDA noted in part that,

    “Agriculture Secretary Tom Vilsack today released the following statement after the successful conclusion of the Stakeholder Workshop on Coexistence hosted by North Carolina State University March 12 and 13, and proposed USDA actions discussed by conference participants:

    “‘USDA recognizes that we need diversity in agriculture and supports the successful coexistence of the different forms of production. Each one contributes to the overall health of farming and rural communities throughout the United States.'”

    Recall that Sec. Vilsack will be testifying this morning at the Senate Appropriations Ag Subcommittee.

    Ron Nixon reported yesterday at The New York Times Online that,

    “The Obama administration has announced a plan to crack down on the multibillion-dollar global black market in seafood, an effort that would try to trace a fish’s story from where it was caught to how it was shipped.

    “Officials said that the unregulated part of the fishing industry, which could be worth up to $20 billion annually, contributes to consumer unease about food safety.”




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