Budget will be the driving factor in 2012
Outside of Mother Nature, one of the most influential variables that can impact your farm operation is what happens in Washington. All the buzz about the national budget has already affected the agriculture industry.
For example, the National Agricultural Statistics Service has announced it is going to scale back the number and scope of reports it releases.
The extent of the reporting changes is a wild card, but you can bet the traders and number crunchers are watching and that their reactions will be felt in farm country.
Here’s a look at five other significant issues in Washington that farmers should keep an eye on as we move into 2012.
New farm bill
The House and Senate Agriculture Committees have been trying to formulate the next version of the U.S. farm bill while meeting budget reduction commitments. Direct payments will be scaled back or eliminated and other farm programs such as Average Crop Revenue Election (ACRE)
will be revised and potentially expanded to bolster their role in farmers’ risk-management decision making.
Japan is showing promise that it will ease its restrictions on U.S. beef imports. The restrictions, which have been in place for eight years, won’t be totally lifted. Japan is expected to up the age limit to allow beef imports from cattle 30 months and younger (the current limit is 20 months and younger). This restriction is likely to apply to Canada as well. Japan might even allow beef from some European countries (such as the Netherlands and France), but likely at the lower age limit of 20 months and younger. The increased demand for U.S. beef could spur feed demand, too.
This year, regulations were top of mind for Republican and Democratic lawmakers, and that trend will continue in 2012. For example, the Environmental Protection Agency recently released yet another letter aimed at assuring ag interests that they will not be subject to stricter dust regulations. The antiregulation focus could also be a factor in other farm-related areas.
The November elections have the potential to bring even more change to Washington. If political pundits are right, the Democratic-controlled Senate will shift to the hands of the Republicans by a narrow margin. Republicans are expected to maintain control of the House, but will potentially lose 10 to 15 seats in the process. That will push the White House to work with Congress even more. If the shifts come through as predicted, it could open the door to a flurry of legislative activity in late 2012, especially if sequestration and across-the-board cuts are still looming in January 2013.
Ethanol without the blenders’ credit
Expectations are for the 45¢-per-gallon ethanol blenders’ credit and the 54¢-per-gallon import duty to expire at the end of 2011 as scheduled. Ethanol backers know they don’t have the political backing to extend the subsidies. The key now is trying to get some of those dollars earmarked for infrastructure improvements that supporters say are critical to broadening the market for ethanol. In addition, efforts to establish a safety valve to cut ethanol mandates when corn supplies are tight won’t likely gain enough traction to become law. The mandates are what will keep corn-based ethanol demand solid despite the disappearance of the ethanol blenders’ credit.
Formerly Policy and Washington Editor for Farm Journal, Roger Bernard is now policy analyst for Informa Economics.