D.C. Watch: Ag budget battles

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Cuts totaling more than $30 billion in agriculture program spending over 10 years are included in the fiscal 2013 budget released by House Budget Committee Chairman Paul Ryan, R-Wisc.,
last week. According to Ryan “The record breaking prosperity of American farmers and farm communities demands reexamining farm programs to ensure that taxpayers aren’t funding support for a sector that is more than capable of thriving on its own."

Under the House budget, farmers would be required to pay higher premiums for crop insurance and have reduced “fixed payments”. The budget would also cut about $122 billion from spending for the Supplemental Nutrition Assistance Program (i.e. food stamps) over 10 years. (The House budget is at least in part an effort to reduce spending on some programs so automatic cuts in defense spending can be avoided.)

But the House budget numbers are “only suggestions” according to House Agriculture Committee Chairman Frank Lucas, R-Okla., in response to the budget committee’s plan. He said people “shouldn’t read too much into the numbers.” The Agriculture Committee is charged with determining how exactly to make the cuts called for in the budget by May. That suggests the need for a vigorous debate on farm bill components during the last two weeks of April!

House ag budget “dead on arrival” in the Senate? House Agriculture Committee Ranking Member Collin Peterson, R-Min., seems to predict that. He says the process outlined by the House budget all but guarantees that there will be no farm bill this year. With the House spending plan several billion dollars under the level agreed to by the House and the Senate in the Budget Control Act approved last summer there is almost no chance that the Senate will go along with the cuts proposed in the House. The chances of passing a farm bill before the election are declining.

Meanwhile, last week the Senate held its final hearing to gather information ahead of drafting a new farm bill. The main theme of the conference was crop insurance and there were plenty of people testifying about how critical the program is. More than half of all farmers buy at least 75 percent coverage and a quarter of all farmers buy 80 to 85 percent coverage. However, crop insurance doesn’t work too well for some farmers, especially producers of rice and other southern crops.

Some farm groups are calling for conservation compliance to be attached to the crop insurance program in the new farm bill. (Previously conservation compliance was only a requirement for farmers to be eligible for direct payments.)

The free trade agreement with South Korea is finally being implemented. Over the longer term, the agreement is expected to result in higher U.S. exports of beef and pork. Tariffs of between 20 percent and 25 percent on pork exports to South Korea will be eliminated by 2016 on frozen pork products. All tariffs on pork will be eliminated by 2022. Tariffs totaling 40 percent on beef imports by South Korea will also be eliminated during the next 10 years.

The Environmental Protection Agency (EPA) has accepted a Misfueling Mitigation Plan for E-15 proposed by the Renewable Fuels Association. With the approval of this plan “EPA’s role in the commercialization of E-15 is largely complete”, according to RFA. The next steps include ensuring companies seeking to sell E-15 are registered with the EPA.

RFA has also released an E-15 Retailer Handbook, which provides guidance in evaluating existing infrastructure compatibility, safety and conversion practices and state specific regulatory requirements. Ethanol prices nearly a dollar below gasoline prices should be enough to make E-15 an attractive option for consumers.

The MF Global trustee is seeking to distribute another $685 million to customers, giving some of them a return of about 80 percent. About $600 million will go to customers who traded on U.S. exchanges. The distributions require a judge’s approval and no date has been set for the payments. Barclays Capital has offered to pay MF Global customers 90 percent of their claims in exchange for any additional funds that may be returned.


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