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Ag Economy – Farm Bill; Climate Change Issues; Animal Agriculture; and Political Notes
Ag Economy – Farm Bill
The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “There has been considerable discussion in the farm press recently about last year’s decline in major economic indicators. Last month, USDA’s most recent economic review documented what producers already know: the sector has been whipsawed by highly volatile domestic and international forces since mid-2008. These trends were initially favorable, the agency said, but then weaker domestic and international markets have undercut prices and returns for many, although not all commodities.
“The result, for 2009, is double-digit declines in crop and livestock cash receipts [related graph depicting value of production]. And, it has meant declines in average net cash income for farm businesses.”
After more detailed analysis, the DTN item noted that, “The bottom line: net farm income was up $8 billion between 2005 and 2008 but will be down perhaps $30 billion for calendar year 2009 — to about $1.5 billion below the 2006 level.
“So, by almost every measure the sector has taken a significant hit in recent months as markets have weakened prices, and costs have declined more slowly — a classic cost-price squeeze for producers.”
And with respect to policy implications, yesterday’s “Washington Insider” indicated that, “Another aspect of the current economic squeeze has been quite unusual — rather than stepping forward when the sector faced stress, the government role has actually retreated recently. USDA says government direct payments that were $24.4 billion in 2005 and nearly $16 billion in 2006 have been nearly flat around $12 billion for the three years 2007-2009, a result of both the new, higher economic price structure of the sector and the extent to which current higher prices are squeezing livestock returns.
“Thus, while it is still several years before the 2008 Farm Act will be up for renewal, serious questions about its effectiveness are being raised by both livestock and crop producers. These have focused on the equity of federal policies concerning agriculture and energy, but can be expected to expand to the sector-wide efficacy of the basic programs themselves, focused as they are on direct payments and protections against low crop prices in an era of higher but much more volatile markets and costs, Washington Insider believes.”
Meanwhile, DTN Executive Editor Marcia Zarley Taylor reported yesterday that, “Livestock producers may need more time to repay the mountain of debt they have accumulated during the past two years, but for some, the clock could be running out. Stricter regulatory oversight gives farm lenders less leeway to work with wounded borrowers in 2010. Some livestock producers with equity in land and other assets are choosing to exit voluntarily, rather than risk watching their life’s savings vaporize.
“‘Not every livestock producer is in trouble, but they need to show lenders enough proof that they can be long-term competitors in their industry,’ said Texas A&M Extension economist and DTN Columnist Danny Klinefelter. Most farm lenders demand formal marketing and risk management plans, and frequent evidence that projections stay on track, he added.”
Yesterday’s DTN article noted that, “One early indicator of trouble is that an increasing number of farmers and lenders are using mediation to resolve debt disputes. Minnesota’s mandatory Farmer-Lender Mediation service received more than 3,100 debt notices from ag lenders in fiscal 2009, up 55 percent from a year earlier and 144 percent above 2004 levels.
“USDA reports a similar trend in all 34 states, with certified farm mediation services. Forrest Buhler, a staff attorney for Kansas Agricultural Mediation Services, estimated the number of cases they handled grew about 10 or 15 percent this year. However, most of the growth has come from dairy and other livestock operators, rather than the relatively healthy crop sector.
“‘Our typical case is an operation where the lenders are questioning the viability and are not sure they want to continue lending if livestock and grain prices stay where they are now,’ said Buhler. ‘I’ve been involved in mediations for 21 years, and I can’t say it’s as bad as the mid- to late-1980s. But it’s clear that it will be harder to get commitments for loans in 2010.’ In Kansas, dairies with fewer than 300 cows seem to be the most common candidates for debt restructuring, he added.”
Meanwhile, Carolyn Cui reported yesterday at The Wall Street Journal Online that, “Mother Nature wreaked havoc on producers of agricultural commodities in 2009 and gave the food market a jolt, sending prices for staples like corn and soybeans on a wild ride only to end the year close to where they started.”
Yesterday’s Journal article added that, “At the end of the year, corn prices were up 2% to $4.145 a bushel at the Chicago Board of Trade, wheat was down 11% to $5.415 a bushel, and soybeans gained 7% to $10.3975 a bushel. Rough rice lost 5%.
“Basic food demand stood firm. Globally, grain consumption was expected to have increased 1.7% in 2009, according to the U.S. Department of Agriculture.”
And a Daily Radio News item from USDA yesterday included a brief economic overview of a couple of key issues that could impact agriculture this year, including how the overall aggregate U.S. economy performs. To listen to this one-minute segment, which features analysis from USDA Chief Economist Joe Glauber, just click here.
Climate Change Issues
In addition to the agricultural sector, U.S. economic performance could have an impact on legislative developments.
Gerald F. Seib, writing yesterday at The Wall Street Journal Online, explained that, “If the big domestic story of 2009 was an economic crisis and its ripple effects in the real world, 2010 will be about cleaning up the debris from that crisis — and discovering what kind of toll it takes in the political world.
“As the new year dawns, recovery from the nation’s worst economic jolt in seven decades seems to be under way. But a smooth recovery is by no means certain — and, in fact, hasn’t even started for tens of millions of unemployed Americans, or for state governments, which lag behind the national economy in climbing out of the hole.
“So for Americans on Main Street, financiers on Wall Street and politicians on Pennsylvania Avenue, the economy figures to dominate the domestic agenda for the year, and to shape a hugely significant election near year’s end.”
With respect to climate change legislation, the Journal article stated that, “For much of 2009, the assumption in Washington was that work on health care would be followed by a turn to legislation designed to fight climate change. But the wounds and exhaustion left by the health fight make it far from certain that Congress will have the stomach for another grand domestic experiment, the creation of a cap-and-trade system for greenhouse gases.”
Peter Nicholas reported in today’s Los Angeles Times that, “And the protracted nature of the healthcare fight, beset as it has been by relentless Republican attacks and by divisions within the Democrats’ own ranks, does not bode well for quick action on other legislation, including the promised jobs bill, immigration or climate change.”
Yesterday’s Commodity News for Tomorrow report, a complimentary daily commodity publication provided by CME Group in partnership with Dow Jones Newswires, reported that, “Prospects are dim for the U.S. Senate to pass a bill next year laying down economy- wide rules to curb climate change.
“Establishing a comprehensive program that caps greenhouse-gas emissions and creates a market for trading emission rights has been one of U.S. President
Barack Obama’s top priorities, but a tough political climate and a historic recession have stalled momentum. House-passed legislation failed to gain the support that Senate Majority Leader Harry Reid, (D., Nev.) needed to bring the bill to the floor, and the debate over health care hogged attention for the second half of 2009. Meanwhile, Democrats in farm and manufacturing-heavy states remain concerned that a cap-and-trade bill could further damage their ailing economies.
“Democratic officials and experts say there’s still a slim chance a compromise proposal that only caps emissions from large, stationary sources such as power plants may get enough votes to pass if Obama leans his full political weight into the issue.”
Yesterday’s article explained that, “But some Capitol Hill analysts wager the president has expended so much of his political capital on a ferocious fight over health-care legislation that forcing the climate-change bill in an election year—and heading into the driving season when gasoline prices historically rise—may be too costly for many vulnerable Democrats.
“One official with strong ties to the Obama administration said it wasn’t clear whether the White House would try to take leadership on the issue, or rather watch to see how the debate plays out in the Senate. ‘I think it’s entirely possible that [the administration] just tries to just smile it along.’”
In a brief analysis of some of the competing climate and energy plans currently being debated in Congress, Jennifer A. Dlouhy reported on Sunday at the Houston Chronicle Online that, “Some moderate Republicans and Democrats want to abandon plans for a broad climate change bill in favor of an energy-only approach that does not specifically address greenhouse gas emissions. The leading candidate is a sweeping measure approved by the Senate Energy and Natural Resources Committee in June that would require that 15 percent of the nation’s electricity come from renewable sources by 2021, aims to speed deployment of electric transmission lines and would open millions of acres of the eastern Gulf of Mexico for oil and gas drilling.”
The Chronicle article noted that, “If Congress doesn’t pass legislation to cap carbon dioxide emissions, some new limits on greenhouse gases could come in the form of regulation by the Environmental Protection Agency. The regulatory approach has few fans in Congress, where critics say it is a blunt tool that cannot be tailored to meet regional needs. New rules also could take years to implement after near-certain legal challenges.”
From an international perspective, Lisa Friedman of ClimateWire reported yesterday at The New York Times Online that, “When presidents and prime ministers departed the U.N. climate conference in Copenhagen last month, they left behind a vast legal tangle that experts have barely begun to unravel.
“A half-dozen edicts that world leaders handed down — dealing with everything from verifying carbon emission cuts to mobilizing billions of dollars for poor nations — require formal enactment rulings from the parties to the U.N. climate conference. But by the time the global summit came to a close on Dec. 18, nations had made none of the necessary follow-up rulings.
“Left unsettled and largely unexplained: how and when the leaders’ directives laid out in the Copenhagen Accord will become reality.”
Ms. Friedman pointed out that, “The first real test of the accord comes Jan. 31, the deadline for both rich and poor countries to submit their economywide emission targets to the United Nations. If that happens as planned, the United Nations will then need to realize another item on the Copenhagen Accord to-do list: a registry to record each country’s action, and a body to provide ‘international consultations and analysis’ that will ensure that China, India and other nations are living up to their climate commitments.
“Then comes the question of money.
“Analysts said short-term funding in the accord announced to help poor countries cope with climate impacts is fairly straightforward. Developed nations promised $30 billion over three years, and at least for 2010, much of the money already has been allocated. The U.S. Congress in its 2010 appropriations targeted about $1.2 billion for various bilateral and multilateral climate projects.”
More specifically with respect to other domestic debate on climate change legislation, Bloomberg writer Iain Wilson reported last week that, “Action on climate change is in Australia’s national interest and must be pursued for the benefit of future generations, Prime Minister Kevin Rudd said.
“‘If we do not act at home and abroad, we betray both our children’s future, and their ability to enjoy our natural wonders, including the Barrier Reef,’ Rudd said today in his New Year’s message to the nation.
“Action on global warming is at the top of Rudd’s agenda as he heads into a year that may see an election fought over the issue. The government has vowed to stick by plans to reintroduce legislation in February to create a national carbon emissions trading system after the nation’s Senate rejected the bill for a second time in December, creating an early election trigger.”
In separate news from Australia regarding climate issues, the AP reported yesterday that, “Angry farmers wearing broad-brimmed hats and cracking kangaroo-hide whips rallied outside Parliament Monday as one of their colleagues continued a hunger strike to demand compensation for Australian climate change policy.
“The protest by 250 farmers and their supporters drew public attention to the plight of sheep farmer Peter Spencer, who they say is on the 43rd day of his hunger strike to protest that he is not allowed to clear vegetation from his 20,000 acre (8,000 hectare) farm.”
The AP article noted that, “State laws introduced throughout Australia since 1995 restrict the amount of land that farmers can clear of vegetation that absorbs carbon dioxide from the atmosphere.
“Slowing land clearing is equivalent to reducing a country’s greenhouse gas emissions in calculations under the United Nations’ Kyoto Protocol.
“Spencer and his supporters argue that farmers deserve federal compensation because the restrictions make their land less productive.
“‘This is not about whether or not a farmer should be allowed to clear land, it’s about fair compensation for the land that the government is stealing from farmers,’ said rally organizer Alastair McRobert, a friend of the hunger striker.”
Animal Agriculture
Sarah Muirhead reported last week at FeedStuffs Online that, “Denmark’s ban on low-level antibiotic use for farm animals was supposed to improve the effectiveness of human drugs and lead to a healthier human population, but after a decade of data collection, the question remains whether that goal is achievable.
“The findings within the Danish human health care sector are being closely monitored in the U.S. as pressure mounts to similarly limit antibiotic use in farm animals here.”
The FeedStuffs article explained that, “The Obama Administration also has indicated support for ending the non-therapeutic use of seven antibiotics for growth promotion and feed efficiency.
“In July, Dr. Joshua Sharfstein, principal deputy commissioner of the Food & Drug Administration, said FDA now believes the judicious use of antibiotics requires that ‘all medications for prevention and control should be under the supervision of a veterinarian.’”
And yesterday’s article added that, “Still, the critical question at hand is whether Denmark has seen an actual improvement in the ability to control human disease and minimize antibiotic resistance.
“This past September, House Agriculture Committee chairman Collin Peterson (D., Minn.) was part of a congressional delegation that traveled to Denmark to meet with government officials, industry representatives and Danish farmers.
“Upon his return, Petersen issued a statement that said, ‘We didn’t come back with a definitive answer on this complicated issue because we found no scientific evidence that reducing antibiotic use in agriculture has resulted in public health benefits in Denmark.’”
In other news, the AP reported today that, “Taiwan lawmakers voted Tuesday to ban imports of some kinds of U.S. beef, reversing an earlier deal the government negotiated with Washington.
“The lawmakers’ move to reinstate a ban on U.S. ground beef and offal reflected public concern that Taiwanese health officials lack sufficient safeguards to prevent mad cow disease. Mad cow disease is a brain-wasting disease in cattle, which in humans can cause a variant form, Creutzfeldt-Jakob Disease.”
“Taiwan purchased $128 million in beef products from the U.S. in 2008,” the AP article said.
Political Notes
Roll Call writer Emily Cadei reported yesterday that, “Former Rep. Richard Pombo (R-Calif.) will run for the seat being vacated by Rep. George Radanovich (R-Calif.) in 2010, adding more firepower to what is expected to be a hotly contested GOP primary.
“Pombo, who was defeated for re-election in 2006, is expected to make the announcement Tuesday. He contacted Rep. Devin Nunes (R-Calif.) to tell him of his decision, Nunes’ chief of staff, Johnny Amaral, confirmed.”
Keith Good
