DTN writer Chris Clayton reported yesterday that, “Policymakers and groups that have sought to reshape farm policy are again calling on Congress to reconsider tax changes to fund the farm bill while also paying direct payments to producers during these times of soaring commodity prices.

“‘It has been somewhat disheartening and disappointing seeing where these negotiations are heading,’ said Rep. Ron Kind, D-Wis., who pushed a failed farm-bill proposal in Congress last year. ‘It’s as if the Congress is operating in a vacuum when it comes to formulating this next farm bill.’

“Those groups demanding reform in the farm bill such as Kind are taking another shot during farm-bill negotiations at questioning commodity payments. At the same time, crusaders for changing farm policy are crediting the Bush administration for demanding more fiscal responsibility in the farm bill. As negotiations continue, the Bush administration still holds a lot of leverage in talks on the farm bill if the president wants more reform, Kind said.”

In more detail regarding direct payments, Mr. Clayton explained that, “Most farm groups have defended direct payments as a safety net that would be there if hard times return. Others have noted that the payments, which are not tied to actual production, are compliant with World Trade Organization rules. The AmericanFarm Bureau backs keeping direct payments, and the National Association of Wheat Growers wanted an increase in direct payments because, in many cases, direct payments were the only safety net for wheat producers over the past farm bill.”

The DTN item noted that, “Kind and cohort Rep. Jeff Flake, R-Ariz., have sent a 10-point plan to House Speaker Nancy Pelosi, D-Calif., and other congressmen proposing to rollback any potential changes in target prices or loan rates, as well as reduce direct payments and establish tighter criteria for farmers to receive commodity payments. Given the current commodity markets, the Kind-Flake proposal particularly targets direct payments, which pay $5.2 billion annually to producers and are not tied to market conditions.

“‘It’s just unbelievable that, given the atmosphere that we are in, that we could not have done better here,’ Flake said.

“With the farm bill now relying on the tax-writing committees for money, Kind and Flake are questioning why the farm bill should need more revenue. Kind is a member of the Ways and Means Committee and doesn’t think there is a lot of support in the committee to use increased revenue for the farm bill. Flake, meanwhile, is one of Congress’ leading fiscal conservatives.”

With respect to the executive branch, the article indicated that, “While the Bush administration has trumpeted change to commodityprograms, the administration has not challenged direct payments. Direct payments, for now, remain compliant with the World Trade Organization and are not considered trade distorting. However, the WTO has ruled that for the U.S. to consider direct payments as non-distorting to trade, the U.S. needs to lift all planting restrictions on that land. Right now, land used to collect direct payments cannot be used to grow fruits and vegetables, for instance, which are not part of the commodity programs. The House and Senate farm bills did not address that restriction.

“Flake acknowledged the administration’s defense of direct payments, but added that ‘they may not have the luxury here,’ Flake said. ‘It’s either that or are the votes there for a tax increase? I don’t think so, and so they may not have the luxury of protecting direct payments and going above the baseline here.’

“Ken Cook, president of Environmental Working Group, said the Bush administration might be willing to consider changes in direct payments now given the market conditions. Shifting money to conservation also doesn’t address the questions in the WTO. Cook also gave credit for the administration’s role thus far in holding Congress accountable on the farm bill.”

For more perspective regarding this development, see this FarmPolicy.com audio podcast from yesterday (MP3) which features audio clips from Rep. Kind, Rep. Flake, President of the Grocery Manufacturers Association and former U.S. Rep. Cal Dooley, and Ken Cook. The FarmPolicy.com audio podcast lasts six minutes and is available here (MP3).

For a closer look at the distribution of federal direct payments, see this Environmental Working Group webpage.

In a related item, David Rogers reported yesterday at Politico.com that, “Amid rising food costs, commodity groups risk a political backlash for not embracing more change in a Farm Bill subsidy structure that continues to pay billions to producers at a time when crop prices have risen to record levels.”

Mr. Rogers added that, “At the same time, voters will be sensitive to the fact that the price of food jumped 4.9 percent in 2007— the largest increase since 1990 and twice the 2006 food inflation rate. And as House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid entered the Farm Bill talks Tuesday night, the annual cost of the direct payment program — about $5.2 billion — was hard for either political party to ignore.

“‘It’s absurd,’ says Professor Bruce Babcock, an Iowa State University economist who just locked in a $5.03 per bushel price for his own 2008 corn crop and would still share in a direct payment adding to his return. ‘It’s the 800-pound gorilla in the room, and it has to be faced,’ said Tom Buis, president of the National Farmers Union.

“Tuesday night’s meeting with Pelosi and Reid brought together House and Senate tax writers in an effort to resolve what additional revenues can be provided to help finance what is now anticipated to be $10 billion in additional Farm Bill costs, chiefly for conservation, nutrition and improved disaster aid over the next decade.”

Mr. Rogers also noted that, “But beyond the revenue offsets, direct payments could still be a target. Just a 10 percent reduction in the program would go a long way toward resolving some of the same budget hurdles facing lawmakers and the White House. And House Agriculture Committee Chairman Collin Peterson (D-Minn.) already is looking at a potential plan to use direct payments to help finance a novel disaster aid program that would help farmers cope with multiyear losses beyond crop insurance.

“‘When wheat is selling at $19.80 at the Minneapolis Exchange and we’re giving out direct payments, it’s kind of hard to explain,’ Peterson said. ‘Direct payments were supposed to be a temporary measure, but it goes on and on,’ said Senate Agriculture Committee Chairman Tom Harkin (D-Iowa). ‘Who doesn’t like free money?’ he added with sarcasm.

“The great irony of the situation is that the same direct payment program began as an effort to move Washington out of agriculture — not into more debt.”

The article also noted that, “‘Prices change, and you don’t write a Farm Bill for now but for years to come,’ says Mary Kay Thatcher, a senior lobbyist for the Farm Bureau. Altering direct payments, especially in the midst of trade talks, ‘doesn’t make sense.’”

Concluding, the Politico.com article stated that, “Watching it all is Sen. Pat Roberts (R-Kan.), who was an early architect of the Freedom to Farm reforms back in 1996 but now sees the same ‘transition’ payments as a more permanent safeguard for his home-state wheat growers plagued by bad weather. ‘Direct payments and crop insurance work together,’ he says. ‘This is the payment for the farmer who doesn’t get a crop.’

“And in a year when the crop is good and the prices high? ‘It’s hard to explain when prices are high,’ Roberts agrees. ‘Yes, there could be a backlash.’”

Meanwhile, Peter Shinn of Brownfield reported yesterday that, “All of a sudden, a farm bill deal looks close at hand. Lawmakers from both sides of the aisle confirm that Republican and Democratic Congressional leaders met Tuesday night and that the broad outlines of a farm bill agreement are coming together.

“The deal would reportedly spend just under $10 billion over the Congressional Budget Baseline for farm programs and would fund it without increasing taxes. Nebraska Democratic Senator Ben Nelson said Wednesday the agreement should clear the way to farm bill passage this spring, if the Bush administration buys into the deal.”

Mr. Shinn added that, “But that’s no sure thing. And South Dakota Republican Senator John Thune told Brownfield Wednesday, if there’s a deal in place that most in Congress can live with, a Presidential farm bill veto could become irrelevant.

“‘If they don’t agree to what the Senate and House are doing, then you’re right, you’re probably end up in a position of having to override a veto, which we will have the votes, I think, in the Senate to do,’ Thune said. ‘And the question would be if whether or not the House could get the votes to do that.’

“Nelson and Thune both suggested a House-Senate deal on the broad strokes of a farm bill could be announced as soon as Thursday. Thune added that the issue then becomes how quickly farm policy can be made to fit the available money, which he called ‘the hard part.’ That’s why Thune said he believes another one-month extension of the 2002 farm bill is likely, which would put a new farm bill in place by mid-April.”

Matt Kaye reported yesterday at Hoosier Ag Today Online that, “It took a meeting with house speaker Nancy Pelosi to jump start the stalled farm bill effort. But despite a deal to raise new money for the bill, many issues remain unsettled.

“Pelosi and senate democratic leader Harry Reid directed their sides to get the farm bill done, arranging an infusion of some 10-billion in new money that the tax writing chairs will come up with.

“Senate ag chair Tom Harkin says the tax chairs should have the final number by Friday but how much sensitive areas like permanent disaster aid get, will have to be worked out. ‘We made a good faith promise we’ll do something on disaster, they’re going to give us the money. Now how much, we don’t know.’”

Mr. Kaye noted that, “Some funding sources have raised veto threats by the white house. House ag chair Collin Peterson said, ‘we’re working with them. I had a good meeting with Chuck Conner just now and he knows what we’re talking about.’”

And in more detail regarding White House perspective on the Farm Bill, DTN Political Correspondent JerryHagstrom reported yesterday (link requires subscription) that, “The Bush administration still wants changes in the farm program if it is to support an increase in the farm bill budget over the current level of funding, Deputy Agriculture Secretary Chuck Conner said Wednesday.

“‘We have made it clear to Congress that we oppose any increase in spending without significant reform,’ Conner stated in an e-mail. ‘The President has said he will veto a tax and spend farm bill. So, this is not just about a dollar amount — it’s about real reform and no tax increases. Even $5 billion is too much if there is little or no reform and no spending offsets.’

“Conner was reacting to an announcement late Tuesday that Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Chairman Charles Rangel, D-N.Y., have agreed to finalize a 10-year budget over the baseline for the new farm bill and to state what revenue raisers they would use to pay for it by late Friday.”

***

A press release issued yesterday by the House Ag Committee stated that, “Today, the House Committee on Agriculture adopted the budget views and estimates letterwhich outlines the Committee’s budget recommendations for the federal agencies and programs under its jurisdiction. The letter will be submitted to House Budget Committee Chairman John Spratt of South Carolina, pursuant to section 301(d) of the Congressional Budget Act of 1974, as well as clause 4(f) of House Rule X.

“‘Our proposed views and estimates letter reinforces the message we sent to the Budget Committee last year in preparation of Farm Bill reauthorization: current farm policies are widely popular, save taxpayers billons, and are serving to enhance the well-being of our farmers, ranchers, needy citizens, and consumers by ensuring a safe, affordable food supply,’ Chairman Collin C. Peterson of Minnesota said. ‘We urge the Budget Committee to take these points into consideration while crafting a responsible budget resolution for the coming fiscal year.’”

The release stated that, “The Budget Views and Estimates letter passed today reflects Agriculture Committee priorities to the House Budget Committee in preparation of the Fiscal Year 2009 Budget Resolution. The chief priority of the committee continues to be the reauthorization of omnibus farm policy to succeed the 2002 Farm Bill.

“Despite a budget baseline that is $60 billion less than when the 2002 Farm Bill was written, the House Agriculture Committee passed a new Farm Bill on July 20, 2007, that continues the popular farmsafety net while including new investments in agriculturally-based renewable energy resources, specialty crops, nutrition, and agricultural conservation programs. The full House passed the bill a week later, the Senate version of the Farm Bill passed on December 14, 2007, and the two bills are in the process of being reconciled.”

Congressional Quarterly writer Leah Nylen reported yesterday on this developing, noting that, “The panel also requested that funding for the farm bill be included in the congressional budget resolution.

“In 2007, the budget resolution did not include funding for the farm bill. Instead, the resolution created a deficit-neutral reserve fund for the farm bill, which requires offsets for any resources beyond the budget baseline. Because the Agriculture Committee does not have jurisdiction over offsets, the panel requested that the Budget Committee reconsider the reserve fund framework.

“‘From this committee’s perspective, it is far easier to operate with budget certainty than it is to deal with the prospect that additional resources may or may not materialize in the future from other committees and with strings attached,’ Peterson said.

“Final passage of the farm bill has been complicated by the reserve fund. Committees in both chambers have been working from a five-year baseline of about $280 billion allotted to the bill under the budget resolution. Any spending beyond the baseline requires revenue-raising offsets such as tax increases.”

Biofuels

An item posted recently at the German Marshall Fund (GMF) Online noted that, “On February 22, GMF hosted a roundtable meeting on the European proposal for a new EU directive on the use of renewable energy and to assess the outcomes of the February 21 meeting of the U.S.-EU biofuels working group under the U.S.-EU Strategic Energy Cooperation. The speakers featured Alexandra Langenheld, a national expert on regulatory policy and promotion of renewable energy at the European Commission’s Directorate General for Energy and Transport, and Jeff Skeer from the office of policy and international affairs at the U.S. Department of Energy. Franz Matzner from the Land and Forests Program at the Natural Resources Defense Council provided comments. The meeting was moderated by GMF Transatlantic Fellow Tim Searchinger.”

A GMF podcast interview with Alexandra Langenheld, Jeff Skeer and Tim Searchinger is available here (MP3).

The GMF update added that, “Alexandra Langenheld laid out the key aspects of the new EU proposal. It would mandate member states to increase their shares of renewable energies to 20 percent by 2020 and would set a separatetarget to increase biofuels use to 10 percent of transport fuel consumption. The Commission’s text includes limitations for biofuels cultivation on biodiverse grasslands, wetlands, and peatlands, as well as specific requirements for overall greenhouse gas savings. It also includes limitations on direct land use change.”

“Jeff Skeer discussed current U.S. biofuels policies. He mentioned that the goal was to arrive at a mixed policy approach of producing cellulosic ethanol and importing sugarcane ethanol. He said that the United States was trying to, ‘do it the right way,’ but that land use change research was still at too early a stage to draw the right assumptions for biofuels production. He mentioned that one of the problems was coordinating the input and interests of different U.S. executive departments,” the GMF update said.

The update also pointed out that, “With regard to transatlantic cooperation on biofuels policies, Langenheld and Skeer agreed that the main topics were research and development, and potential agreements on standards and sustainability, especially life cycle greenhouse gas emissions assessments. One of the goals would be to come to an international agreement on land use.”

In other biofuels news, an update posted yesterday at AgWired.com included an audio replay containing portions of speech given by Undersecretary for Rural Development, Tom Dorr, which was delivered at the National Ethanol Conference.

And, an update posted yesterday at The Ethanol Report included an audio replay of a presentation delivered by Rick Tolman, CEO of the National Corn Growers Association, which was also delivered at the National Ethanol Conference; while an interview with Renewable Fuels Association President Bob Dinneen from yesterday at the conclusion of the Conference can be heard here.

Keith Good