Evening Report (VIP) -- May 14, 2013

May 14, 2013 10:00 AM

KEY FARM BILL ISSUES AHEAD... The Senate ag panel cleared its farm bill markup by a vote of 15-5 today and the House ag panel is set to mark up its farm bill draft tomorrow, but floor action in both chambers is likely to feature heated debates. And ultimately, major differences between the two farm bills must be rectified. Some of the most significant differences include the following.

  • Food stamp funding cuts are the biggest difference between the two farm bills. The Senate proposes cuts of around $4 billion, while the House measure proposes $20 billion in cuts over 10 years. Some Senate Democrats think $4 billion in cuts is too high; some conservative House Republicans think $20 billion in cuts is too low.
  • The latest CBO score shows the following farm bill funding levels for key proposed Title 1 programs in the Senate measure: Adverse Market Payments (AMP): $3.476 billion; Ag Risk Coverage (ARC): $23.716 billion; Total: $27.192 billion. The ARC program constitutes 87.2% of the funding in the Senate's Title 1 farm safety net, considerably above the estimated expenditures via adverse market (target price) payments. Both bills would eliminate direct payments. But under the House bill, cotton growers would get a transition payment for 2014 and 2015 crops that would be calculated at 6.667 cents per pound on 70% of base acres for 2014 and 60% for the 2015 crop.
  • Both bills contain a new dairy program that incorporate a supply management plan opposed by dairy processors and House Speaker John Boehner (R-Ohio). The dairy program was not changed via the Senate Ag panel process, but it "could be a close call" in the House Ag panel, according to one veteran farm policy analyst who nonetheless thinks the supply management language will prevail in the House Ag Committee though admits "all bets are off" during House floor debate.
  • The Senate bill would phase in a lower maximum acres for the CRP program to 25 million acres by 2018; the House would lower its acreage cap to 24 million by 2017.
  • The Senate bill includes new payment limits and tighter subsidy eligibility rules strongly opposed by House Agriculture leaders. The Senate bill also requires conservation compliance for crop insurance policy holders.
  • The Senate bill would provide $800 million in mandatory funding for programs in its energy title, including subsidies for renewable energy projects and biomass crop assistance. The House bill has no such funding.
  • The U.S. sugar program would remain intact under both the Senate and House bills.



CONSULTANT STAYS CONSERVATIVE WITH CROP FORECASTS FOR NOW... Pro Farmer crop consultant Dr. Michael Cordonnier says it appears 50% to 60% of the U.S. corn crop will be planted during the second half of May, when corn yields on average typically start to decline. As a result, he is remaining cautious with his corn yield estimate of 155 bu. to 156 bu. per acre, which is below USDA's initial projection of 158 bu. per acre.

Dr. Cordonnier is now estimating 1 million to 2 million acres of intended corn acres will eventually get switched to beans or be claimed as prevent-plant acres. This is slightly less than the 1 million to 3 million acres he had previously expected to be switched out of corn, as flooding along the Red River Valley in North Dakota and Minnesota was less severe than anticipated.

For soybeans, Dr. Cordonnier projects the national average yield at 43.5 bu. to 44 bu. per acre, which is below USDA's initial projection for a record national average yield of 44.5 bu. per acre. While the crop can overcome a slow start as weather in July and August is the primary factor in determining soybean yields, Dr. Cordonnier feels it's premature to anticipate a record soybean yield at this point.



CROP INSURANCE PAYOUTS CONTINUE TO SLOWLY RISE... Indemnities for 2012 crop losses have risen to $17.256 billion as of May 13, pushing the loss ratio for the program to 1.56, according to Risk Management Agency (RMA) data. The loss ratios for several key crops remain at 1 or more (more than $1 in indemnities paid out for every $1 in premiums paid into the program). Corn edged up to 2.72 while cotton is at 1.30, pasture and rangeland is at 1.11 and sorghum stands at 1.88. While the loss ratio is up considerably from the prior record payout year of 2011 when it was at 0.90, the loss ratio for the program has not been above 1.0 since 2002.

Enrollment in the program for 2013 continues to run ahead of where it was at this point last year with 87.439 million net acres insured compared to 85.736 million net acres insured on 2012 crops one year ago. Total net acres insured for 2012 crops stands at 282.377 million with 264.870 million net acres covered by something other than the catastrophic loss coverage.



GENERAL SIGNUP FOR CRP BEGINS NEXT WEEK... USDA will conduct a four-week Conservation Reserve Program (CRP) general signup beginning May 20 and ending on June 14. UDSA Secretary Tom Vilsack also announced the restart of sign-up for continuous CRP, including the Conservation Reserve Enhancement Program, State Acres for Wildlife Enhancement Initiative, the Highly Erodible Land Initiative, the Grassland Restoration Initiative, the Pollinator Habitat Initiative and other related initiatives. Sign-up for continuous CRP began on May 13 and will continue through Sept. 30, 2013. Get more details.


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