CONAWAY OPTIMISTIC ABOUT FARM BILL COMPLETION… Representative Mike Conaway (R-Texas), farm bill conferee and chair of the House Ag Subcommittee on General Farm Commodities and Risk Management, kicked off the 2013 Farm Journal Forum with an optimistic tone. Conaway says much progress was made in yesterday's meetings of farm bill principals and he expects more progress over the weekend, though much remains to be completed. There was very little partisanship during the farmer safety net negotiations, according to Conaway, though this was less the case when it came to food stamp negotiations.
In an AgriTalk interview following the event, Conaway noted that Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) is still the No. 1 hurdle and that Title I safety net issues remain a contentious area. Conaway said a farm bill will likely be completed in January due to the mechanics of process, including scoring, paperwork and getting the bill passed in both the House and the Senate.
On the crop insurance front, Conaway noted he personally opposes adjusted gross income limits as well as conservation compliance linkage and will continue to fight against them. He also fielded a number of questions about dairy policy and a possible reversion to permanent law from 1949. Conaway indicated he does not support an extension of the 2008 Farm Bill to avert this possible reversion to permanent law as he feels this threat keeps pressure on lawmakers to complete a farm bill. Get more details.
FARM BILL UPDATE: BASE VS. PLANTED ACREAGE ISSUE FOR PAYMENTS APPEARS RESOLVED... Usually reliable sources signal that a key farm bill conference decision has apparently been made to figure any Ag Risk Coverage (ARC) or Price Loss (Target Price) Coverage (PLC) payments on base acres and not planted acres. This apparent move comes largely due to pressure from national corn, soybean and canola lobby groups who pushed hard for payments be decoupled from actual plantings.
If base acres are used to factor both ARC and PLC payments, one source said, "Well if this is the final decision, this is what you get when you make a bid deal about potential World Trade Organization (WTO) problems if you go to planted acres. In terms of equity, I guess farm bill conferees decided not to allow planted acres for one farmer safety net choice and not the other, thus they likely went to current base acres for both.
Sources say it is an "open issue" regarding how base acres would be defined.
Another safety-net related issue is the push by Sen. Max Baucus (D-Mont.) for a farm-related-based safety net program, something Senate Ag Chairwoman Debbie Stabenow (D-Mich.) is reportedly pushing hard to include in the final farm bill package. If so, that would be bring on additional costs which some sources say would have to be offset. While some in the Senate reportedly want to reduce the percentage of acres (likely base) that any ARC or PLC payments are made on, sources say there has been no final decision and that House conferees have rejected such the suggestion.
Meanwhile, on another major farm bill issue, contacts say $8 billion cuts in food stamp funding has reportedly been offered by Sen. Stabenow, but they wonder if any such funding cut amount could get enough votes from both Democratic and Republican members in both the House and Senate to approve any final farm bill conference report. "Getting a farm bill conference concluded is just part of the problem," one source said. "Getting the majority of both the House and Senate to vote to approve the conference report is another issue."
SCHERR: LOWER PRICES, STRONGER DEMAND TO BOOST AG CONSUMPTION… Bruce Scherr, Chairman and CEO of Informa Economics, painted a rosy picture for U.S. agriculture ahead at the 2013 Farm Journal Forum. Many tend to get anchored to the supply side of agriculture and the lower prices this year's larger crops imply. Instead, Scherr encouraged stakeholders to think about how the global economic situation has changed and the favorable trajectory for U.S. and global ag production. Agriculture is not settling into doldrums; rather, the industry may be at the brink of one of its strongest periods in history, according to Scherr. Looking ahead, Scherr says strong demand coupled with lower prices imply an increase in consumption, if you believe the markets work. The question, according to Scherr, is whether that increase will be a modest one or a surge. He favors the latter view. Learn more.
THIRD QUARTER ECONOMIC GROWTH MUCH STRONGER THAN EXPECTED... The U.S. economy grew at a stronger-than-expected 3.6% annualized rate in the third quarter, according to the Commerce Department, up from the previously reported 2.8% rise for the quarter and above the 3% uptick traders expected. The third-quarter growth pace was the fastest since the first quarter of 2012 and was a marked improvement from 2.5% growth in the second quarter.
With third quarter GDP coming in much stronger than anticipated, there is talk this could cause the Fed to start tapering its $85 billion per month in asset purchases sooner than has been expected. But underlying domestic demand remains sluggish as consumer spending was revised down to 1.4% -- the lowest since the fourth quarter of 2009. That's likely to be enough to keep the Fed printing money and the tapering on hold.
MINNEAPOLIS FED BANK REPORTS FLATTENING IN FARMLAND VALUES… The value of Northern Plains and upper Midwestern farmland continues to flatten, according to preliminary data from the Federal Reserve Bank of Minneapolis. The Fed bank serves Minnesota, Montana, the Dakotas, the Upper Peninsula of Michigan and northwestern Wisconsin. According to its survey of ag bankers, the value of non-irrigated cropland rose just 0.2% during the third quarter of 2013 compared to the previous quarter. The value of irrigated cropland, meanwhile, rose 3.3% versus the second quarter. Pasture/ranchland increased 4.4% on a quarterly basis.
This is the second quarter in a row that increases in the value of the bank district's farmland have been muted, reports our LandOwner newsletter. This follows strong increases seen in the fourth quarter of 2012 and first quarter of 2013. As a result of those earlier gains, the bank reports farmland values posted strong increases on an annual basis for the year ending Sept. 30. The bank states the value of non-irrigated farmland rose 18% while the value of irrigated cropland surged 23% on an annual basis. Meanwhile, the value of ranchland rose 16% on an annual basis.
The flattening in gains in the value of farmland seen in the Minneapolis Fed bank district is consistent with findings reported by the Federal Reserve Banks of Chicago and Kansas City which cover the central Corn Belt and the Central & Southern Plains, observes LandOwner.
Iowa State University will release its annual update of that state's farmland values next Wednesday and we'll have coverage of those bellwether figures.
LP, NATURAL GAS RUN HIGHER AS DEMAND OUTRUNS SUPPLY... Propane prices have moved dramatically higher and the current condition of both natural gas and propane stocks suggests limited downside potential for LP near-term. Hours of service waivers had been issued in eight northern states to allow delivery drivers to spend more time on the road amid high demand. Most of those waivers have now expired, but will remain in effect for North Dakota until Dec. 6, and Wisconsin until Dec. 15.
A late-season demand push log-jammed supplies as much of the incoming crop was run through the dryer after harvest. Delivery trucks were quickly shuffled around the Midwest to keep deliveries moving to the farm, but the onset of cold weather now puts LP for dryer fuel in direct competition with propane for home heat.
Current national propane stocks are 18.23 million barrels behind the same time last year and well below the bottom end of the five-year average. Meanwhile, U.S. natural gas stocks have fallen as well, sending the January 2014 contract above $4 today, marking a 44 1/4-cent surge from early November. The U.S. Energy Information Administration reports a 162 billion cubic foot decline in stocks on hand the week ended Nov. 29, leaving the national supply 5.2% below year-ago and 2.8% below the five-year average.
Retail propane prices reported to Pro Farmer Inputs Monitor have been on the rise since July, now 30 cents above year-ago pricing at a Midwest average of $1.74. Given strong on-farm demand, low national stocks and a frigid weather forecast, prices for both LP and natural gas are likely to remain pointed higher near-term.