An item posted on Wednesday at Farm Futures Online noted that, “When Congress reconvenes in January, a House-Senate Conference Committee will iron out differences between the two versions [of the Farm Bill]. House Agriculture Committee Chairman Collin Peterson, D-Minn., says meetings last week with House Ag Ranking Member Bob Goodlatte, R-Va., Senate Ag Chair Tom Harkin, D-Iowa, and Senate Ag Ranking Member Saxby Chambliss, R-Ga., were productive. He says they all are confident that details can be worked out and actually they aren’t too far apart on policy.

“However the same may not hold true with the White House. Acting Ag Secretary Chuck Conner has been voicing support for reform, in particular a cap on adjusted gross income. Peterson says he is willing to work with the White House on the Farm Bill, but the proposed cap of $200,000 won’t fly.”

Meanwhile, a legislative summary item posted at The Washington Post Online earlier this week by Robert McMahon, included this snippet on the Farm Bill: “But there were signs Congress itself was going to come under fresh scrutiny on U.S. trade practices because of legislation it approved in 2007. For example, business groups said a version of the Farm Bill passed by the House during the summer had protectionist elements. Their chief concern involved a provision to raise nearly $7.5 billion in the next ten years from foreign corporations with U.S. subsidiaries that would help offset the costs of the bill. After the Senate approved the $286 billion Farm Bill in December 2007, the World Trade Organization said it had opened an investigation into whether the United States was violating international rules limiting subsidies to farmers. President Bush has indicated he may veto the bill. Trade remains a hot issue on the presidential campaign trail among Democratic candidates who have vowed tougher measures to assure what they call ‘fair trade.’”

And, in an article from earlier this week, Gannett News writer Faith Bremner reported on legislative accomplishments obtained by Montana’s Congressional delegation, and noted in part that, “Montana’s senior senator, Democrat Max Baucus, said he’s especially proud of his effort to get a new permanent disaster aid program in the farm bill so farmers don’t have to wait a year or two for Congress to get around to helping them. He also cited his work in inserting provisions to improve support payments for wheat and barley and to stop the U.S. Department of Agriculture from closing Farm Service Agency offices.”

The article added that, “Baucus said he doubts Bush will follow through on a threat to veto the farm bill. He predicted Republicans will be less inclined to support Bush’s agenda as the president moves closer to the end of his term and the Republican presidential nominee moves to center stage.

“‘(A veto) would not be very smart,’ Baucus said. ‘Frankly, a lot of people around the country would be very upset if that were to happen. It might affect some congressional races, too.’”

In a broader look at the political environment in Washington, D.C., the article explained that, “The Senate this year held 62 votes to cut off debate, known as cloture votes, the highest number ever recorded in a two-year congressional session, according to the Senate clerk’s office. Thirty-one times, the majority failed to muster the 60 votes needed to proceed with the bill. One of those blocked measures was the farm bill, which won the unanimous support of the Senate agriculture committee.

“Tester [Montana’s freshman senator, Democrat Jon Tester] said the arguments Republican leaders make in defending the blocking maneuvers aren’t convincing, especially when it comes to the farm bill. The bill ultimately moved forward after a month’s delay, but now faces Bush’s veto threat.”

Meanwhile, Mark S. Jordan, writing on Wednesday at the Mount Vernon News Online (Ohio), reported that, “Despite the inclusion of such features as incentives for developing biofuel technologies and improving local markets for farmers, the 2007 Farm Bill approved last week by the Senate has yet to reach the shape many lawmakers would like to see.

“Sen. Sherrod Brown, D-Ohio, was satisfied on one hand that the farm bill was ‘forward-looking and would support Ohio farmers and rural communities.’ But he also felt disappointed that the Senate lost an opportunity to reform the farm bill by defeating Brown’s RESCU (Reduction of Excess Subsidies to Crop Underwriters) Amendment.

“‘Instead, the Senate continued huge overpayments to crop insurance companies,’ Brown said.”

(FarmPolicy.com Note: a related item on Sen. Brown’s amendment is available here; and related FarmPolicy.com audio from the Senate floor debate on this issue is available here).

Mr. Jordan added that, “The amendment, which Brown co-sponsored along with Sen. John Sununu, R-New Hampshire, and Claire McCaskill, D-Missouri, targeted windfall subsidies paid to crop insurers. According to the Government Accountability Office, those subsidies result in 40 cents of every dollar Congress appropriates for farmers going to insurance companies. Brown estimated that his amendment would have cut more than $2 billion in wasteful spending from the bill, but the amendment was rejected.”

In a related item on crop insurance, Nancy Cole reported last week at the Arkansas Democrat Gazette Online that, “Row-crop farmers in Arkansas and Mississippi buy only about half as much crop insurance as their peers nationwide.

“The U. S. Department of Agriculture’s Risk Management Agency wants to know why and how federal programs might be changed to make crop insurance more attractive as a tool for managing the risk of producing rice, soybeans, cotton, wheat, corn and grain sorghum.

“‘Till some changes are made, it’s just not profitable,’ said Tommy Poole, referring to the shortcomings of crop insurance.”

The article stated that, “In 2007, Poole spent $22,000 in premiums to insure about 2,500 acres but received only $18,000 in indemnity payments, despite a nearly total loss on some soybean fields. Next year, instead of buying similar insurance, he plans to buy more fertilizer to improve his yields or buy options on the futures market to protect the prices he will receive for his crops.

“Poole was one of several Arkansas farmers who met Wednesday in Stuttgart to discuss crop insurance. The meeting was one of a series of ‘listening sessions’ held in Arkansas and Mississippi with farmers, crop insurance agents and adjusters, crop consultants, bankers, and extension service specialists.

“The meetings were organized by Tom Earley, an agricultural economist with Promar International, an Alexandria, Va.-based food and agriculture consulting firm that was hired by the Agriculture Department to study the reasons for low participation rates in federal crop insurance programs in Arkansas and Mississippi.”

With respect to conservation and the Farm Bill, Brad Dokken reported last week at the Grand Forks Herald Online (North Dakota) that, “The final farm bill that a House and Senate conference committee will forge early in 2008 stands to include plenty of initiatives for wildlife and habitat protection.

“Both the House and Senate versions of the farm bill call for keeping the Conservation Reserve Program at 39.2 million acres. That’s a key component and good news for wildlife, conservation and natural resources officials say, because CRP arguably has done more for habitat than any program in U.S. history.

“The big question is whether farmers will continue to buy into CRP and other conservation measures at a time of near-record commodity prices and increased interest in ethanol.”

The article noted that, “Like CRP, the wetland and grassland reserve programs pay farmers to develop and enhance habitat on marginal lands. WRP and GRP both were scheduled to ‘sunset’ with the current farm bill and needed to be re-authorized and re-funded, Link [Greg Link, assistant wildlife division chief for the North Dakota Game and Fish Department] said.

“The farm bill versions also tackle appraisal problems that hampered interest in WRP, especially in the northern U.S.

“‘There has been a problem with the way the value of WRP easements has been calculated,’ Stephens [Scott Stephens, director of conservation planning for Ducks Unlimited’s Great Plains Regional Office in Bismarck] said. ‘It reduced the payments for landowners, and it drove the interest way down.’”

In addition, the article pointed out that, “Also included in both versions of the farm bill is a new provision known as Sodsaver, which would discourage farmers from converting native grassland to cropland by removing their eligibility for federal disaster payments and crop insurance.

“Both Game and Fish and Ducks Unlimited have been advocates for Sodsaver. Native grasslands, such as those Sodsaver would protect, provide crucial habitat for ducks and other birds, Stephens said, along with grazing opportunities for livestock.”

Later, the article explained that, “A previous farm bill provision, known as Sodbuster, only required farmers to develop a plan to address erosion on grasslands they converted to cropland.

“‘In reality, (Sodbuster) hasn’t slowed conversion much and has proved to be rather ineffective,’ Stephens said. ‘That’s the real reason we were pushing for this Sodsaver provision, which we think will be more effective at reducing those conversions.’

“Stephens said the House version of Sodsaver isn’t quite as strong as the Senate’s because it only removes landowners’ eligibility for the federal disaster payments for two years; the Senate version makes them ineligible for an indefinite period.”

The article also pointed to the reality of higher market prices and noted this had some impact on conservation: “‘With high prices and good commodity support, folks are having to make choices on the landscape, and one of those is tearing up native prairie,’ Link of Game and Fish said. ‘That’s something we’re very concerned about, and it’s been happening both in North Dakota and South Dakota.’

“‘Obviously, grass around wetlands, any time you lose an acre of that, you’re reducing the fall flight of ducks.’

“Another good component of the farm bill, Link says, is the ‘Open Fields’ legislation that Sen. Kent Conrad and Rep. Earl Pomeroy, both D-N.D., worked to introduce in the Senate and House. Open Fields would back existing state programs to reward farmers and ranchers who open their land to hunting, fishing and other outdoors-related access.”

In editorial opinion regarding the Farm Bill, the editorial board at The Minneapolis Star Tribune opined yesterday that, “After a six-week impasse, the Senate passed a $286 billion farm bill that makes only minor changes to the bloated agricultural subsidy system that rewards rich farmers for being farmers. The Senate rejected an amendment proposed by Sen. Amy Klobuchar, D-Minn., that would have stopped subsidy payments to full-time farmers with adjusted incomes of $750,000, rather than the current cutoff of $2.5 million. The amendment, which needed 60 votes for passage, was backed by a 49-48 majority. A separate amendment that would have capped the payments themselves at $250,000, down from $360,000 now, also died in the Senate.

“That made it an early Christmas for lots of wealthy farmers and their elected representatives, including Sen. Blanche Lincoln, D-Ark. Lincoln threatened to hold up the entire bill unless Democratic leaders agreed to the 60-vote requirement. Arkansas is just one of the big agricultural states whose farmers will get a nice cut of the estimated $20 billion in federal subsidies this year. Even with high crop prices and increasing land values, two-thirds of the windfall will go to the wealthiest 10 percent of the country’s farms.”

(FarmPolicy.com Note: Due in part to higher market prices, the U.S. Department of Agriculture’s Economic Research Service has indicated that, federal subsidy payments this year are projected at about $12 billion. Payments totaled about $24 billion in 2005, anddropped to just under $16 billion in 2006. Since 2002, federal subsidy payments have only been at or above $20 billion one time, 2005. See related graph).

(FarmPolicy.com Note: Recall that “the definition of a farm employed by the USDA for data collection purposes is ‘any operation that sells a least one thousand dollars of agricultural commodities or that would have sold that amount of produce under normal circumstances.’” Some farm policy observers suggest that this is an overly broad definition of a “farm” and hampers the persuasiveness of arguments relating to federal payment distributions based on farm income).

The editorial noted that, “Although major changes in the subsidies system appear unlikely, there’s another chance for Congress to take a crack at the income and payment limits. In January the Senate bill will have to be reconciled with the House version, and President Bush has proposed significant subsidy caps.

“A key player in that work will be Rep. Collin Peterson, D-Minn., chairman of the House Agriculture Committee. Peterson said he would like to see some progress on subsidies, and he credited Klobuchar for creating some momentum with her amendment. But Peterson’s optimismwas guarded at best. ‘The administration still continues to push their ideas, but there’s no support in the Congress for it,’ he said.”

The Star Tribune also noted that, “‘It would be good if someday we get to the point where we don’t need farm payments,’ Peterson said. That day may be years off, but next month House and Senate conferees will have another chance to at least put stricter limits on subsidies for farmers who don’t need a taxpayer bailout to make a living.”

Ethanol - Acreage

Associated Press writer Tara LaCapra reported yesterday that, “Though the new energy bill requires increased ethanol usage, the industry may still be weighed down by overcapacity issues and high corn prices that have plagued it this year.”

The article explained that, “Legislation passed on Dec. 19 requires that 9 billion gallons of ethanol be blended next year. The industry will surpass that before the end of the first quarter, according to Banc of America Securities analyst Eric Brown. There will be 13.4 billion gallons of annual production capacity by the end of 2008 if plant construction continues on schedule.

“Brown and other analysts expect corn prices to keep climbing regardless of what happens to ethanol. There is also a severe lack of infrastructure, because the corrosive fuel cannot be transported along the same pipelines as gasoline.

“‘We expect ethanol margins to remain under pressure due to supply increases, logistical impediments … and imports,’ Brown said in a note on Dec. 18, the day before President Bush signed the legislation.”

The AP article also noted that, “Corn ethanol is a ‘stepping stone’ to cellulosic, Calyon Securities analyst Kelly Dougherty said in a note Thursday. She expects the increased renewable fuel standard to lead to ‘continued infrastructure build-out, opening of new markets, and increased discretionary blending along the path to commercialization of cellulosic which should support higher ethanol prices.’

“But there are other significant obstacles to meeting that goal, not least of which is devising a profitable method of producing cellulosic ethanol. Other challenges include growing enough feedstock without harming the environment and efficiently transporting the fuel component to refineries and fuel pumps across the U.S.”

A separate AP article from yesterday discussed potential acreage shifts when farmers plant their crop this spring. “A shift from corn to beans may be inevitable, given the context. U.S. farmersharvested a record 13.1 billion bushels of corn this fall on nearly 93 million acres planted, in many cases cutting their soybean acreage for corn’s sake to take advantage of high prices fed by demand for ethanol, the corn-based fuel additive,” the article said.

“Now, many observers see U.S. farmers moving 4 million to 6 million of those corn acres back into soybeans to take advantage of prices that have soared for that commodity, lately beyond $11 a bushel — a price not seen since the early 1970s.”

The article noted that, “To Darrel Good, a University of Illinois market specialist, guessing what farmers will do with their acres is foolhardy.

“‘I don’t think there’s any basis for knowing that at this point,’ he said. ‘Farmers at the margin will make up their minds late. To make specific forecasts right now, I think, borders on the insane.’”

Later, the article stated that, “A recent University of Illinois study that took in such expenses as seed, fertilizer, chemicals, fuel, labor and machinery repair projected the cost of growing corn was $330 an acre. The cost for soybeans? Only about $200 an acre.

“Throw in the lofty price of soybeans — lately fetching $10 to $11 a bushel compared to the$6.50 to $7 price a year ago — and the potential returns can be hard to ignore.

“Still, there’s demand for both crops. U.S. inventories of soybeans, adequate last year to weather the pullback in acreage, will need to be replenished next year. And Good says U.S. corn exports are expected to stay strong as Chinese exports continue declining, helping keep corn prices robust.

“‘The market has to say, ‘OK, how much corn do we need and what price of corn does it take to get that many acres?’’ considering the input costs, Good said. ‘That judgment will be unfolding over the next several months.’”

EU Corn Issue

New York Times writer Elisabeth Rosenthal reported on Wednesday that, “A proposal that Europe’s top environment official made last month, to ban the planting of a genetically modified corn strain, sets up a bitter war within the European Union, where politicians have done their best to dance around the issue.

“The environmental commissioner, Stavros Dimas, said he had based his decision squarely on scientific studies suggesting that long-term uncertainties and risks remain in planting the so-called Bt corn. But when the full European Commission takes up the matter in the next couple of months, commissioners will have to decide what mix of science, politics and trade to apply. And they will face the ambiguous limits of science when it is applied to public policy.

“For a decade, the European Union has maintained itself as the last big swath of land that is mostly free of genetically modified organisms, largely by sidestepping tough questions. It kept a moratorium on the planting of crops made from genetically altered seeds while making promises of further scientific studies.”

The article added that, “But Europe has been under increasing pressure from the World Trade Organization and the United States, which contend that there is plenty of research to show such products do not harm the environment. Therefore, they insist, normal trade rules must apply.”

Keith Good