D.C. Watch: Farm program changes on agenda

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House and Senate Agriculture Committees now have only 2 weeks to make recommendations to the Joint Select Committee on Deficit Reduction (the super committee) about changes to farm programs. The president recently laid out his recommendations, with $33 billion in cuts to farm program spending over 10 years. Several Senators from farm states are developing a program called the Aggregate Risk and Revenue Management Act or ARRM. The proposal would eliminate direct and countercyclical payments and SURE and would significantly modify the ACRE program.

The ARRM would provide payments to producers that suffered “shallow losses” not covered by crop insurance. The new program would save about $20 billion compared to current programs. If the super committee fails to reach agreement or Congress refuses to accept the super committee’s proposed changes, agriculture program spending would be reduced by about $15 billion under the automatic
sequestration that would kick in.

A new dairy policy bill has been introduced by House Agriculture Committee Ranking Member Collin Peterson (D-MN) that would provide “margin protection” insurance for producers at a base level of $4 per cwt. in milk income over feed costs. Producers could also buy subsidized supplemental insurance. Producers that sign up for the program would be automatically enrolled in the Dairy Stabilization Program that would require reductions in production when margins fall below certain levels.

The future of the proposed bill is unclear. House Agriculture Committee Chairman Frank Lucas (R-OK) has said he wants all segments of the industry to be in agreement before he moves dairy legislation and the International Dairy Foods Association is opposed to Peterson’s proposed bill. (Note: So far, no new dairy program has been introduced in the Senate.)

Five agriculture disaster programs have expired. The three of most significance are the Supplemental Revenue Assistance program (SURE), the Livestock Indemnity program and the Livestock Forage Disaster Program. These programs expire a year before the rest of the farm bill and were designed that way to reduce the costs of farm programs. There is little chance the programs will all be renewed in the current
deficit environment and the costs of the programs to date will not be included in the overall spending baseline for the next farm bill.

The Senate passed a continuing resolution to keep the government running through Nov. 18 and the House is expected to sign off on the deal. Funding for all government operations would have ended on the last day of September and the Federal Emergency Management Agency (FEMA) has essentially exhausted the available funds. Passing any funding bills has become a difficult and frustrating exercise in Congress
these days. The super committee faces significant challenges in coming up with deficit reduction plans that the various factions in Congress will accept.

Legislation that would waive part of the ethanol Renewable Fuels Standard (RFS) when the corn stocks-to-use ratio falls below certain levels is under consideration by some members of Congress. The motive would be to ease feed costs for livestock producers when corn supplies are very tight. However, ethanol supporters point out that an increase in feed costs is only one side of the debate over ethanol production and use. According to the Center for Agriculture Development, ethanol has provided an average annual savings to consumers of 25 cents per gallon for motor fuel and that for 2010, gasoline prices would have averaged 89 cents higher without ethanol. Usually the debate centers on ethanol’s impact on food prices with little thought to how much the product saves consumers on energy costs or that higher energy prices are a major factor in raising food prices.

A federal judge has sided with Bunge in its refusal to buy corn grown with Agrisure Viptera seed from Syngenta. The corn has been approved for import by several key countries, but not by China. The judge ruled that “Bunge’s decision to reject Viptera corn at all its locations was a legitimate and reasonable business decision”. The ruling may cause problems for producers that planted the Viptera seed this year.



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