Washington Report

8/12/11

How Could the Ag Cuts Fall? Which Programs Live and which Die?

The first fall of the federal spending axe is the $900-plus billion that must disappear from federal ledgers during the next year, and insiders look to action to achieve this number as a pretty good indicator of how agriculture spending will fare overall as the new Special Joint Deficit Reduction Committee, aka “the super committee, begins its work.  As ag groups accelerate their farm policy machines, they’re focusing on the three pipelines for federal dollars included in any farm bill:  Direct payments, conservation programs and crop insurance.  Direct payments are square in the bullseye of budget hawks, and conservation programs – as check-to-farmer programs – are second in line. The smart money right now sees the federal crop insurance program as one area where spending pain may be less, with significantly increased emphasis on revenue protection policies tied to conservation compliance.  Crop insurance dodged the bullet in the last round of cuts.  The best indicators thus far are the House-passed FY2012 budget resolution – which envisioned taking ag spending down by a whopping $30 billion – and the House-passed FY2012 agriculture/FDA appropriations bill, which came up just short of that $30 billion when the dust had settled. The next slice of the spending pie is the $1.2-1.5 trillion that must be cut, with those cuts beginning in 2013. While the respective agriculture committees will not be given a specific target number or percentage for cuts, it will be their job to make recommendations and possibly provide recommended legislative language – that could become the next Farm Bill – on how and where to make the cuts. The talked-about cuts beginning in 2013 range from $11 billion to $48 billion over a decade, but it’s likely both Rep. Frank Lucas (R, OK) and Sen. Debbie Stabenow (D, MI), chairs of the House and Senate ag panels, respectively, will use the publicly stated position of cuts equaling ag’s overall percentage component of the budget, i.e. about 1%, as their starting point.  Programs ag groups have identified for preservation include export promotion and marketing programs, ag research and some parts of the conservation title.  Consumer and anti-hunger groups are fighting to save food stamps, women and children nutrition programs, as well as foreign food aid programs.

 Corn Estimate Dropped on Weather

While still the third largest crop on record, USDA this week dropped its estimate of 2011 corn production to 12.9 billion bushels, up 4% from last year, but less than expected. The culprit is drought and continued heat over major corn producing states.  Yields are expected to average 153 bushels per acre, up slightly from last year.  The stocks-to-use ratio is now estimated at 5.4%, close to a record low.  Acreage for all planted purposes is 92.3 million, unchanged from the department’s June estimate. Soybean production is forecast a 3.06 billion bushels, down 8% from a year ago, with yields set at 41.4 bushels per acre, down 2.1 bushels from a year ago.  Area planted is down only marginally from the 75 million acres estimated in June. 

Peterson Pushes Dairy Program Reforms; Simpson Joins Effort

House Agriculture Committee ranking member Rep. Collin Peterson (D, MN) said this week he’s been joined by Rep. Mike Simpson (R, ID) in efforts to reform the nation’s federal dairy programs, with Simpson signing on to Peterson’s draft reform legislation.  Peterson’s draft legislation, released last month, is predicated on the assumption “the current dairy safety net is inadequate and in need of reform.”  The Peterson-Simpson plan is built off three major components: A Margin Protection Program, that sets a floor for producer margins by looking at the all-milk price and average feed cost; a Dairy Market Stabilization Program designed to prevent “margin volatility” by signaling to producers when production increases will affect margins, taking into account export markets, and rewrite of the Federal Milk Marketing Order program so that it is simpler by reducing classes from four to two – Class I is bottled or fluid milk, Class II is processing or manufacturing “farm milk into something else.” 

Vilsack ‘Reassures’ Producers of Extreme Weather Assistance

USDA will continue to work with farmers, ranchers and rural communities hardest hit by drought, flood, fires and tornadoes, Secretary of Agriculture Tom Vilsack said this week.  Vilsack said he’s issued disaster designations for 547 counties in 30 states, and so far producers have received $693 million in indemnity payments, including more than $520 million in drought aid and $88 million in flood assistance.  For livestock producers, USDA has provided $114 million through the Livestock Forage Program, with another $50 million spent in Texas, $24 million in Oklahoma and $11 million in New Mexico.  The department has also issued about $30 million in emergency loans to help about 280 producers, and has offered all current loan holders in designated counties the opportunity for a “disaster set-aside,” meaning they can delay their annual payment to the final year of the loan. Over 230 producers have taken the payment deferral option. 

USDA Announces CRP Changes on Drought Relief

USDA’s Farm Service Agency (FSA) announced Conservation Reserve Program (CRP) changes this week designed to help farmers struggling with sustained drought.  FSA will allow farmers and ranchers in drought states who have been approved for emergency grazing – including Colorado, Kansas, New Mexico, Oklahoma and Texas – to extend that grazing period from September 30 to October 31 without payment reductions. FSA will also permit farmers nationally to feed hay harvested from expiring CRP acres when those acres are prepped for fall crops, while CRP rental rates are decreased 25% for both the haying and grazing options.  Details can be found at www.fsa.usda under “conservation programs and disaster assistance.”

Administration Announces New Heavy Truck, Bus Fuel Efficiency Standards

The first-ever national fuel efficiency and greenhouse gas emission standards for heavy truck and buses were announced this week by the White House.  The Department of Transportation (DOT) said heavy trucks and semi trucks built between 2014 and 2018 will need to reduce fuel consumption 20% by 2018, with heavy-duty pickup trucks and vans slated for a reduction of 15% in the same time frame.  Delivery trucks, buses and garbage trucks are set for a 10% reduction in consumption by 2018. The Owner-Operator Independent Drivers Assn. immediately attacked the new standards as a flawed “one-size-fits-all” standard that will raise costs for small business. The American Trucking Assn. (ATA) likes the new rules and said the national speed limit should be reduced to 65 miles per hour to achieve further fuel savings. The White House says the new standards will save $50 billion over the life of the program. 

DHS Proposes New Ammonium Nitrate Security Program

In an August 2 Federal Register notice, the Department of Homeland Security (DHS) announced its proposal to create an Ammonium Nitrate Security Program as part of the department’s efforts to secure “potentially dangerous” chemicals.  The new proposal seeks to regulate the sale of ammonium nitrate while ensuring legitimate uses are not restricted.  The program would be built on users validating their need to use the chemicals, requiring those selling ammonium nitrate to retain records and report thefts or loss to federal authorities within 24 hours.  Because the proposal covers the “transfer of possession” of ammonium nitrate, it has implications for transporters as well as sellers and users.  Details can be found at www.dhs.gov.