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Policy Journal: Active Start to 2011

February 7, 2011
By: Roger Bernard, Farm Journal Policy and Washington Editor
F11094
Higher crop prices will likely impact the more than 4.4 million acres in Conservation Reserve Program contracts set to expire Sept. 30.  
 
 

Washington experienced a flurry of activity in the first few weeks of 2011—and not just in regard to the snowstorm that hit the region and caused government-related disruptions. But the weather proved no match for action in Washington.

Agriculture and the State of the Union

Trade and biofuels were among the diverse topics President Barack Obama touched on in his State of the Union address to a joint session of Congress. The atmosphere was more cordial than at times in the past, in part due to a new seating chart used in the chamber. Republicans and Democrats sat side by side, putting Senate Ag Committee Chair Debbie Stabenow (D-Mich.) next to the panel’s new ranking Republican, Pat Roberts (Kan.).

Obama called for Congress to pass legislation to implement the U.S.-Korea Free Trade Agreement "as soon as possible." The administration wants to get the deal in place before a Korea–European Union trade deal takes effect July 1.

In regard to biofuels, Obama touted renewable fuels as a way to reduce dependence on imported oil, but he didn’t specifically talk about ethanol as one of the keys to that push.

Biofuels

In January, the Environmental Protection Agency (EPA) cleared E15 (15% ethanol, 85% gasoline) fuel for use in cars and light trucks made from 2001 to 2006. (This past fall, the agency approved E15 for 2007 and newer cars and light trucks.) But it did not give the fuel a green light for off-road vehicles or small engines.

Don’t look for E15 at a filling station near you just yet. EPA’s plan for labeling pumps to prevent misfueling is still being finalized, and many in the gasoline retailing industry say that misfueling and liability issues may keep the fuel from reaching consumers for another 18 to 24 months.

Meanwhile, several lawmakers are preparing legislation to boost the number of vehicles that can use E85 (85% ethanol, 15% gasoline) and increase the number of retail outlets that have blender pumps to allow consumers to choose the ethanol fuel blend they want. One plan would include the availability of loan guarantees to help fund construction of an ethanol pipeline to move the fuel out of the Midwest.

Food prices

Higher grain prices means higher food prices in some countries, which is prompting citizens to protest higher food bills. In the U.S., food price inflation is still moderate for 2011. USDA economists forecast a 2% to 3% increase in food prices for the year, noting that "higher food commodity and energy prices have recently exerted pressure on wholesale and retail food prices."

This year’s increase comes after two years of minimal rises. USDA’s Economic Research Service (ERS) said in its monthly update that food prices rose 0.8% in 2010 compared with 2009, which is the smallest increase since 1962. While keeping its overall forecast unchanged for 2011, ERS did note that pork prices are forecast to increase more than it previously expected.

CRP sign-up

Another general sign-up for the Conservation Reserve Program (CRP) is slated for March 14 through April 15. This marks the second consecutive year for a general sign-up, and this one comes far earlier in the growing season. With contracts on more than 4.4 million acres set to expire Sept. 30, the impact that current prices have on the amount of land offered for the program will be an important factor to watch. In the last general sign-up, about 60% of land bid into the program was under a CRP contract that was set to expire in fall 2010.

Record deficit

The Congressional Budget Office has updated its budget projections and is now predicting a record budget deficit of $1.48 trillion for fiscal year 2011. The updated outlook is one more factor in bringing deficit reduction into focus in Washington, along with expectations for cuts to government spending in a host of areas, including agriculture.

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FEATURED IN: Farm Journal - Mid-February 2011
RELATED TOPICS: Policy, Biofuels, USDA, Economy

 
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