Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

May 17, 2013

Farm bills move out of committee

Pro Farmer Associate Editor Meghan Pedersen and Washington Consultant Jim Wiesemeyer did a great job of summarizing the House and Senate versions of the 2013 farm bill in this week's Pro Farmer newsletter. Following is there comparison of the Commodity Titles in the two bills.

Senate Ag Panel safety net:

• Eliminates direct payments, ACRE and SURE.

• You can enroll same acres in both Adverse Market Payments (AMP) and Ag Risk Coverage (ARC) programs, with optional Supplemental Coverage Option (SCO).

• ARC, a “shallow loss” revenue protection plan, makes payouts based on full market-year price triggered by revenue loss of at least 12%. Payouts based on planted acres, up to average acres planted 2009-12, with a one-time choice between farm- and county-level coverage.

• AMP target-price-based program, with protection limited to 85% of base acres. Target (reference) price levels are below the House.

• New Stacked Income Protection (STAX) plan implemented beginning with 2014 cotton crop. No reference price.

House Ag Panel safety net:

• Eliminates direct payments, ACRE and SURE.

• Offers choice between Revenue Loss Coverage (RLC) or Price Loss Coverage (PLC), with optional SCO.

• County-level RLC payments based on planted acres, limited to base acres, using midseason price for determining payments paid in October.

• PLC target price protection based on 85% of planted acres up to base acres. Higher target price levels than the Senate.

• Offers “transition payments” to cotton producers to boost safety net for 2014 and 2015 crops, even if STAX is available those years. These are calculated at 6.667¢ per pound on 70% of base acres for 2014 and 60% for 2015 crop. No reference price.

Comparison and implications:

The Senate will eventually have to boost its savings level and some key ARC provisions may change later in the farm bill process. The Senate bill favors Midwest and northern Corn Belt growers as ARC spending accounts for almost 90% of Title I spending. The House farm bill is more balanced regarding its choice between RLC and PLC.

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

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Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

May 3, 2013

House farm bill gets ready for a mid-May markup

Lawmakers will be targeting a 10-year savings of $38 billion when the House Ag Committee begins its work on May 15, according to Chairman Frank Lucas (R-Okla.). He says House GOP leadership has not yet committed to a time for floor action, but they have indicated another extension is not an option.

Lucas also says the Supplemental Nutrition Assistance Program (SNAP), which accounts for about 80% of farm bill spending, would be cut by $20 billion in the new bill, with the rest of the savings coming primarily out of the commodity and conservation titles. Updated scoring of last year’s House version put SNAP savings at $11.7 billion, $4.3 billion below the 2012 scoring.

Lucas also says the new bill would make larger cuts in conservation spending and he hinted the Conservation Reserve Program may be reduced by more than the 25-million-acre cap proposed last year.
The commodity title will be left largely intact and target prices in the Price Loss Coverage program will be “very close” to the levels in last year’s bill, according to Lucas.

But the committee action will just be a preview. The real action in the new farm bill debate will come during floor action, especially in the House, where amendments are expected to deal with crop insurance, dairy policy and the U.S. sugar program. And that’s not considering efforts to rectify the wide budget savings differences expected between the two versions — $23 billion in the Senate versus $38 billion in the House.

Sen. Cochran’s presence felt on ag panel

Unlike last year, this year’s Senate version will include a producer option for target/reference prices. However, target price levels in many cases are expected to be below the House-proposed levels of 2012. Some sources signal rice and peanuts could be the “favored commodities” relative to target price levels in the Senate. That would signal the significance of new ranking member Senator Thad Cochran (R-Miss.).

Egg-laying roadblock?

Senate farm bill markup may begin as soon as this week (mid-month is most likely) and Senate Ag Committee Chairwoman Debbie Stabenow (D-Mich.) might add another hurdle to getting a farm bill completed. If she puts the so-called Egg Bill in the coming farm bill draft, she’ll get plenty of resistance instead of support from farm groups. This measure, which some have dubbed “Hilton for Hens,” would require national standards of housing hens.

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

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Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

April 12, 2013

Pro Farmer Associate Editor Meghan Pedersen and Washington consultant Jim Wiesemeyer offer this latest update on a couple of key ag issues inside the Beltway:

Crop insurance

Several proposals in the budget deal with this program, including two provisions for crop insurance companies: trim the rate of return to 12% (currently estimated at around 14%) and to base the reimbursement for administrative and operating expenses on 2006 premiums not the current 2010 premiums that were some of the highest in history for the program.

But producers would also see cuts — a three-percentage-point reduction in the premium subsidy on policies subsidized more than 50%, and a cut of two percentage points on the premium subsidy where producers elect to have policies that provide protection against price increases. Many in Congress will fight this effort, but reducing the premium subsidy is likely to become reality at some point.
 

New farm bill
 

The Senate Ag Committee will mark up its bill this month or early May. The House Ag Panel will follow. An important factor is getting one unified savings number; that may not happen until debt limit hike talks end in late July/early August.
 

Key farm bill issues ahead: One is the amount of food stamp savings. This figure will most likely be determined via an agreement between congressional leaders and the White House. As for the likely farmer safety net in the final bill, it will consist of crop insurance (including the Supplemental Coverage Option) and an optional target (reference) price option. There won’t be a shallow loss/Ag Risk Coverage program due to cost factors.

 

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

March 22, 2013

Pro Farmer Associate Editor Meghan Pedersen and Washington consultant Jim Wiesemeyer offer up their perspectives on the challenges facing the ethanol industry.

RIN volatility raises concerns about gas prices
 

Recent volatility for ethanol Renewable Identification Numbers (RINs) has spurred lawmaker and industry reaction. Earlier this month the credits traded above $1 per gallon as tightening ethanol supplies and mandates to blend renewable fuels resulted in high demand for these blending credits.

Last week Senator David Vitter (R-La.), the top Republican on the Environment and Public Works Committee, and Sen. Lisa Murkowski (R-Alaska), ranking member of the Energy and Natural Resources Committee, asked Gina McCarthy, nominee to lead the Environmental Protection Agency (EPA), to outline “how she will protect American citizens from rising gas prices due to the rising cost of ethanol RINs.”

The Wall Street Journal Online reports, “Valero Energy Corp. said it will have to spend two or even three times as much as it did last year to comply with the federal ethanol-blending requirement due to the high prices of credits it needs to buy under the law.” House panel examines RFS Launching a bipartisan review of the Renewable Fuels Standard (RFS), the House Energy and Commerce Committee released its first in a series of white papers that will examine a number of issues emerging with the current system and solicit input from interested stakeholders.

Noting that it has been more than five years since the RFS was revised and that in some ways RFS has not unfolded as expected, the white paper notes“Several implementation challenges have emerged that received little if any consideration prior to passage of the Energy Independence and Security Act of 2007.

Furthermore, the overall energy landscape has changed since 2007. It is time to undertake an assessment of the RFS.” The first white paper addresses the so-called “blend wall,” or the point at which adding the required volume of ethanol to gasoline supplies would result in ethanol blends that exceed 10%, which is the maximum ethanol content approved for sale for use in all vehicles.

Because gasoline demand has declined in recent years and ethanol targets have continued to rise, the blend wall is approaching much faster than anticipated. The required volumes of ethanol as set by the RFS must now be added to a smaller-than-expected pool of gasoline; many experts predict the 10% blend wall may be reached as soon as this year. While blends containing up to 10% ethanol (E-10) have long been used, refiners may need to start producing E-15 to stay in compliance. The approaching blend wall raises several issues for producers, refiners, auto manufacturers and fuel retailers. The white paper examines these and poses a number of questions for discussion.

The committee is requesting interested stakeholders to send responses to these questions by April 5, 2013.
 

Perspective: Total gasoline consumption this year is estimated at 134.8 billion gallons. At that, every gallon of gas would have to be a 10% ethanol blend to hit 2013’s mandated 13.8-billion-gallon usage. RINs would account for the remaining “use.” This year’s ethanol production, however, is on pace to hit about 12.6 billion gallons and grain-based ethanol use will be about 12.3 billion gallons, forcing RIN inventory down about 1.5 billion.
 

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

March 8, 2013

Pro Farmer Associate Editor Meghan Pedersen and Washington consultant Jim Wiesemeyer offer up their perspectives on the latest farm bill happenings this week.

CBO updates farm bill scores
 

House Speaker John Boehner (R-Ohio) told members of the Ohio Farm Bureau that he expects both the House and Senate to pass a farm bill this year. But the eventual farm bill will likely be quite different than either the Senate or the House Ag Panel 2012 versions. Reason: The Congressional Budget Office’s (CBO) February baseline update yielded far less favorable scores for last year’s proposals.

While both plans would still save money relative to continuing current policies, CBO says “the reductions would be significantly smaller than we estimated in 2012,” due to later enactment and “updated baseline projections for commodity prices, land conservation and nutrition spending.”

CBO indicates the Senate farm bill would bring total direct spending for affected USDA programs to $963 billion for 2014 -2023, or $13.1 billion in savings compared to continuing the current program. This compares to CBO’s prior estimate of $23.1 billion in savings for 2013-2022.

CBO now estimates the House farm bill spends $950 billion from 2014-2023, which represents savings of $26.6 billion relative to continuing current programs. CBO previously scored it as saving $35.1 billion for 2013-2022.
Sources indicate lawmakers may use this February baseline from CBO to score farm bill proposals rather than the more traditional March CBO baseline because the Obama administration has failed to release its Fiscal Year 2014 budget proposals that were due by law Feb. 4.

Major farm bill changes ahead

These lower savings numbers will likely necessitate key changes to 2012 farm bill proposals and possibly a quicker farm bill end zone. For one, the combined revenue-assurance and Supplemental Coverage Option (SCO) is now too expensive, especially in the Senate version. This means the shallow-loss payments program may be nixed or significantly altered in favor of focusing on crop insurance, along with SCO, as the premier Title I farmer safety net. Reference (target) prices are likely to remain in the farm bill as the CBO’s score of the House farm bill showed little change since 2012 in these costs.

Higher costs for dairy

The updated scores also showed a surge in the cost of a gross margin dairy program with “optional” supply-management language. This means the program pushed by Representative Collin Peterson (D-Minn.), the alternative approach suggested by Reps. Robert Goodlatte (R-Va.) and David Scott (D-Ga.), and the Senate-passed dairy language will all require major changes to fit coming budget constraints.

As one observer notes, “The CBO numbers on dairy show that all three proposals cost money, rather than saving money, over 10 years... The idea that supply management is needed to stay within budget constraints has been exposed for what it is — a farce.”

SNAP costs on the rise

Another major problem for the Senate farm bill is that CBO’s update shows the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) will cost money rather than saving $4 billion, as previously estimated. The updated baseline also reflects reduced food stamp savings for the House farm bill, but contacts signal lawmakers have already found a way to bring the program savings figure back to the previous $16-billion target.

Combine CBO’s new farm bill scoring with near-record farm income, a 62% federal subsidy on crop insurance buy-up premiums, and the government’s $16.4-trillion national debt and it is clear major changes to previously proposed safety net, dairy policy and food stamp funding are coming.
 

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory

To see more of what Pro Farmer has to offer, be sure to visit www.profarmer.com.