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September 2013 Archive for John Block Reports from Washington

RSS By: John Block, AgWeb.com

John Block has dedicated his professional career to the fields of agriculture, food and health.

Trade Concerns

Sep 30, 2013

This week, I was on a panel with three other former Secretaries of Agriculture. The event, sponsored by Croplife, was a lot of fun for those of us on the program and also the audience. Not surprising, the farm bill was in the spotlight. "Will we get one – won’t we get one." And, what the final bill might look like. We did agree that, in the end, we probably will get a bill, and the farm and nutrition provisions will be reunited. I compliment Jay Vroom, CEO of Croplife, for structuring an outstanding ag industry meeting.

I put on the table an issue that I don’t think has received enough attention. The issue is trade and how the farm bill provisions can affect trade. We export 30% of our farm production. A healthy U.S. agriculture needs the global marketplace.

We have been in a running battle with Canada since the 2002 farm bill, which requires the labeling of "country of origin" (COOL). That sounds reasonable, but it’s not that simple. An example might be baby pigs that are farrowed in the U.S. – shipped into Canada to be raised to market weight – then shipped back into the U.S. for slaughter and processing. The processing companies would be required to segregate those pigs from the U.S. pigs. The meat would have to be segregated and correctly labeled. That would include every production step (born, raised, slaughtered). The whole process is ridiculous and costly. We have a Free Trade Agreement with Canada and Mexico. Canada and Mexico consider the COOL law to be trade-distorting. They are right. The World Trade Organization has ruled that COOL is unfair to Canada and Mexico.

USDA has tried to rewrite the COOL rule but Canada and Mexico are prepared to retaliate with trade restrictions against our exports.

Here we are in the process of negotiating a new trade agreement with Europe and another one with Pacific countries. We don’t want our farm bill to be out of compliance with world trade rules. There is even risk that the counter-cyclical price supports in our new farm bill could be a problem.

Even today, we are paying Brazil millions of dollars each year to bribe them to not impose tariffs on our exports. Why? Because our Cotton Program does not meet WTO standards.
Let’s get it right this time.



Critics Attack Crop Insurance

Sep 16, 2013

Here is what Bloomberg had to say: "Taxpayers Turn U.S. Farmers into Fat Cats with Subsidies." They point their finger at crop insurance. They go on to say, "Federal crop insurance encourages farmers to gamble on risky plantings in a program that has been marred by fraud. The cost is increasing. Last year, we spent 14 billion dollars insuring farmers against the loss of crop, almost 7 times more than in 2002, according to the Congressional Budget Service."

Bloomberg and the other critics have a point. However, keep in mind the Direct Payments in the current farm bill will be gone in the next bill (if they ever pass it). The Sugar Program needs to be reformed. I don’t know if that will happen. The Dairy Program has been a problem forever. When I was Secretary of Agriculture, we tried to make it more market-oriented with modest success. The fact is, today, both sugar and dairy are supply-managed programs. I should also add that nutrition programs can expect a cutback in the new farm bill.

The one program looking for expansion is Crop Insurance. If we jettison all of the other safety nets, I think we need crop insurance. The uncertainty of weather can bankrupt some farmers. I do feel that we have to be careful when increasing the government subsidies in crop insurance. Today, the farmer pays about 40% of the cost of the insurance. The government pays 60%.

When I buy house insurance, I pay the full cost. The government doesn’t help. (Of course, if you have a house in a flood plain in Florida, the government does help pay.) But, that’s another issue. Crop insurance in the new farm bill could cost taxpayers about 9 billion dollars per year. Let’s not forget that crop insurance is all that stands between the farmer and the unpredictable forces of nature.

I have a concern that if we eliminate all the risk with heavily subsidized, inexpensive insurance, farmers will plow up land and grow crops for the insurance instead of the market.

On the other hand, if the insurance is too expensive, farmers won’t buy it, and when the drought hits, they are out of business. It is a delicate balance.

As of today, I don’t personally have a dog in this fight. With 4,000 acres of corn and soybeans, we have never bought crop insurance. Will I change my mind some day? I don’t know.

I do believe crop insurance, in the end, will be the last safety net standing.

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