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Sec. Vilsack- Trade; Climate Issues; and Crop Insurance

Sec. Vilsack- USDA Perceptions

DTN editor-in-chief Urban C. Lehner noted on Friday that, “Our agriculture secretary has been taking verbal abuse from all directions. When he defended transgenic seeds before a crowd of local-food activists last October, they booed him. When he included organic and local-food speakers at USDA’s annual Outlook meeting in late February, the traditional production-ag types acted as if USDA had been taken over by aliens.”

“Unlike his critics in the alternative-ag community, he understands that feeding a growing world population will require increases in agricultural productivity that going local and going organic won’t provide. Unlike his traditional-ag critics, he realizes that agriculture has a role to play in preserving the environment, and to play it well will require adopting the best ideas from a variety of agricultural approaches, including the local and organic movements.

“‘I have two sons, and I love them both,’ Vilsack has said of the competing schools of how agriculture should be practiced.”

Mr. Lehner noted that, “And so Vilsack’s USDA fights for biofuels, which most traditional corn and soybean farmers love, while it enthuses about Michele Obama’s organic White House garden and holds ‘Know Your Farmer, Know Your Food’ sessions that small-holder, ‘local’ farmers love. Today’s USDA funds research on genetically-engineered seeds while tightening the criteria to consider a crop organic. It fights to expand exports of U.S. meat while pushing fruits and vegetables in school lunches.

“Split personality? Perhaps. But you could also put it the way Vilsack does: ‘Everyday, every way, USDA.’ Or the way China’s Mao Zedong did: ‘Let a hundred flowers blossom.’ Or, simply, you could say Vilsack, like any good agriculture secretary, supports farms — big commercial farms, organic farms, all farms.”

The DTN update added that, “Loving two sons makes political sense for a Democratic ag secretary these days. Much of the party’s activist base believes that corn is bad, meat is bad, alternative agriculture is good. Many of the party’s elected officials, on the other hand, support traditional commercial agriculture, including most of the members of the agriculture and agriculture appropriations committees. The Democratic president and his wife are politically correct devotees of ‘healthy’ food. The only safe political course for Vilsack is the middle ground.”

In an article with somewhat similar themes, Philip Brasher reported in yesterday’s Des Moines Register that, “Angela Jackson is not a typical Iowa farmer and certainly isn’t the typical recipient of farm subsidies.

“She grows vegetables for local supermarkets, not grain for biofuels or livestock feed.

“But she’s the kind of farmer the Obama administration wants more of, and that raises alarms among some colleagues in conventional agriculture. They worry they’ll be harmed by the Agriculture Department’s new focus on small farms and encouragement local production of fruits and vegetables.”

Mr. Brasher noted that, “‘USDA shifted on me,’ said Tim Burrack, a farmer near Arlington in northeast Iowa who is chairman of the Iowa Corn Promotion Board. He said the Obama administration’s local-foods initiative, dubbed ‘Know Your Farmer, Know Your Food,’ to promote small-scale agriculture, will drive up food costs because large farms are more efficient.”

Yesterday’s Register article added that, “Agriculture Secretary Tom Vilsack, a former Iowa governor, said that helping farmers like Jackson will keep people on the land, generate income for rural economies and improve Americans’ health by eating more fresh produce. But he said conventional growers, known collectively in agribusiness circles as ‘production agriculture,’ stand to benefit, too, because the administration’s campaign will improve the image that urban dwellers have of farmers and farm programs.

“‘The shrinking number of farmers and shrinking number of rural legislators mean we need to create alliances and create partnerships to make sure people understand what production agriculture does and make sure it has continuing support,’ Vilsack said.”

Sec. Vilsack Speaks on Trade

A news release from the USDA on Friday stated that, “Agriculture Secretary Tom Vilsack today discussed USDA’s work to strengthen the American agriculture economy and revitalize rural communities in the keynote speech at the 2010 Commodity Classic in Anaheim, Calif. Vilsack focused on the USDA’s efforts to increase exports of agricultural products to help American farmers, ranchers, and workers.

“‘USDA’s continued work to expand trade opportunities for America’s hard-working farmers and ranchers will play an important role in our effort to rebuild rural communities across the country,’ said Vilsack. ‘Increased trade will not only create important income opportunities for producers, but also the off-farm jobs that are so critical for revitalizing rural America.’” (See related graph).

To listen to a brief audio clip from Friday’s presentation by Sec. Vilsack, just click here (MP3- 4: 24). A complete audio replay of the entire speech is available here.

Friday’s Commodity News for Tomorrow report, a complimentary daily commodities newsletter provided by the CME Group, indicated that, “U.S. Agriculture Secretary Tom Vilsack on Friday said the government would overhaul its strategy for promoting agricultural products abroad and work to increase the acceptance of biotechnology in foreign countries in a bid to improve the economy.

“Vilsack, speaking at the annual Commodity Classic conference, said the U.S. Department of Agriculture would drop its ‘one-size fits all’ approach to promoting agricultural exports in favor of tailored marketing programs for different countries. The effort is part of President Barack Obama’s goal of doubling all U.S. exports within the next five years.”

Jeff Caldwell and Dan Looker reported on Friday at Agriculture Online that, “Agriculture Secretary Tom Vilsack got a round of applause Friday when he told crop producers at the Commodity Classic in Anaheim, California Friday that Russia has agreed to reopen its market to U.S. pork exports.

“Vilsack said that the agreement which followed days of high-level negotiations is an example of USDA taking a new approach to trade promotion.”

Friday’s USDA announcement regarding pork exports and Russia was welcomed by Sen. Ag Committee Chairman Blanche Lincoln (news release), Iowa GOP Senator Charles Grassley (news release), and the National Pork Producers Council (news release).

In a separate development on agricultural trade, Nebraska GOP Sen. Mike Johanns indicated on Friday that, “In a meeting today with Japanese Ambassador Ichiro Fujisaki, Sen. Mike Johanns continued to push for Japan to lift its partial ban on U.S. beef. Johanns highlighted the inconsistency between Japan’s continued ban on safe U.S. beef and beef products compared to America’s fair treatment of Japan after reports of faulty Toyota vehicles and parts.

“‘The Japanese ban on U.S. beef has devastated our beef industry and many producers throughout Nebraska for almost seven years,’ Johanns said. ‘Japan’s position, for which there is absolutely no scientific justification, has cost American producers billions of dollars and created a double standard that defies rationalization. I am not suggesting any sort of ban on Japanese products; I am asserting that the Japanese ban on American beef is entirely unfair, without merit, and should be lifted immediately.’”

In a related news item, Agri-Pulse Senior Editor Stewart Doan filed a brief audio report today titled, “Vilsack and Johanns spar over which administration dropped the ball on beef exports to Japan.” This very interesting recap is available here (MP3- 2:00).

In other trade news, James Politi and Jonathan Wheatley reported yesterday at The Financial Times Online that, “Brazil takes another step towards a final showdown with the US in its long-running battle over cotton subsidies when it releases on Monday a list of about 50 American products it will punish with higher tariffs.”

The article explained that, “Brazil has already published a preliminary list of more than 200 US products on which it may raise tariffs as a result of the WTO victory, from sardines and cherries to shampoo and sunglasses to medical equipment, as well as cotton itself.

“On Monday, Brazil will announce a final, narrower list of 50 products – worth about $560m (€411m, £370bn) in total – that are slated for punishment. Those retaliatory measures will take effect in April.”

Politi and Wheatley added that, “When Hillary Clinton, US secretary of state, visited Brazil last week, much of the attention was focused on the disagreement between the two countries over imposing sanctions against Iran.

“But in a sign that a deal over the cotton dispute was becoming urgent, Mrs Clinton said she would dispatch two high-level officials to Brazil to discuss what further concessions the US could make in order to avoid retaliation. ‘There is time for us to resolve this in a peaceful and productive way without any further action,’ Mrs Clinton said.”

“Meanwhile, media reports in Brazil suggested an agreement might involve technology transfer from the US to Brazilian cotton farmers. The office of the US trade representative and the US department of agriculture declined to comment,” yesterday’s FT article said.

Climate Issues

Emily Pierce reported this morning at Roll Call Online that, “In an already challenging election year for the majority, Sen. John Kerry’s (D-Mass.) rush to pass a climate change bill has many Democrats scratching their heads and charging that their 2004 presidential nominee could further imperil vulnerable Members this fall.

“Climate change had been considered all but dead this year, and Senate Democrats have little appetite to take up the controversial issue after the beating that they have endured over their as-yet-unfinished health care reform efforts.

“‘The United States Senate is not going to transition from doing health care to a [global warming] bill,’ one Democratic Senator said. ‘It’s not going to happen.’”

Today’s article explained that, “The divide in the Democratic caucus reared its head last Wednesday when Kerry — who chairs the Foreign Relations Committee — gave a presentation to his fellow chairmen on his progress in drafting a new bill with Sens. Joe Lieberman (ID-Conn.) and Lindsey Graham (R-S.C.).

“Sources familiar with the meeting said Senate Democratic Policy Committee Chairman Byron Dorgan (N.D.) and Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) challenged Kerry, who asserted that his new bill should be done this year because it would be bipartisan and would allow Democrats to get around having to tackle the controversial cap-and-trade issue.

“Dorgan was upset that the so-far failed efforts of Kerry and Environment and Public Works Chairman Barbara Boxer (D-Calif.) to craft a bipartisan global warming bill were needlessly delaying action on a separate, bipartisan measure that includes many ‘green energy’ initiatives that Kerry and Boxer want to attach to a climate bill. Bingaman, who wants to move on climate change, was more concerned that a failure to do a broader global warming bill would prevent the Senate from passing the targeted energy bill separately. The committee approved that narrower measure last year.”

In addition, the Roll Call article added that, “Though Kerry has argued he has new momentum for a global warming bill given his collaboration with Lieberman and Graham — Kerry previously co-authored the bill that passed Boxer’s committee last fall — Democrats of all stripes said the political risks of taking up such an explosive issue are too great.

“‘It is laughable if Kerry and Boxer think Senate Republicans are going to pass a major environmental bill and have [President Barack] Obama sign it right before the midterm elections,’ one Senate Democratic source said. ‘They make Don Quixote look like a realist.’

“Indeed, National Republican Senatorial Committee Chairman John Cornyn (Texas) said doing climate change would ‘absolutely’ be a gift to the GOP in an election year in which they already feel they are riding a tide of angry voter sentiment against Democrats.”

An update posted on Friday at CQPolitics.com reported that, “At first glance, a pair of bills introduced this week by two West Virginia Democrats — Sen. John D. Rockefeller IV and Rep. Nick J. Rahall II — look like fresh attempts to rebuff a White House plan to regulate greenhouse gas emissions.

“But the bills, which would delay regulation for two years, give Democrats a vehicle to vent unhappiness at the EPA without endorsing Republican-led resolutions that would roll back the agency’s regulatory authority.”

The CQ item stated that, “The legislation also would buy Congress time to address global warming through legislation — without removing the ultimate threat of EPA regulation.

“‘The Rockefeller bill is a middle ground that allows Democrats to express concern about EPA regulations without seeking to tie the administration’s hands,’ said Paul Bledsoe, director of communications and strategy at the National Commission on Energy Policy, which advises Congress on energy matters.”

However, Washington Post writer Steven Mufson reported on Friday at the Post Carbon Blog that, “Sen. Robert C. Byrd (D-W.Va.), coal state colleague of Sen. Jay Rockefeller (D-W.Va.), said he won’t back Rockefeller’s legislative efforts to limit the power of the Environmental Protection Agency to regulate carbon dioxide emissions from coal-fired plants.

“Byrd’s statement is a setback for Rockefeller’s effort to limit EPA’s power under the Clean Air Act.”

Meanwhile, Dow Jones reported on Friday (article posted at DTN, link requires subscription) that, “U.S. Energy Secretary Steven Chu said Friday the Obama administration wants to establish federal climate-change policy this year and is talking with lawmakers about a wide range of options for rules that would limit greenhouse-gas emissions.

“‘We’ve got to get it done this year,’ Chu said, speaking at a Wall Street Journal conference in Santa Barbara, Calif.

“While climate change legislation is a top priority for President Barack Obama, the administration ‘is not wedded’ to a particular recipe for how greenhouse gas emission-reduction rules should be crafted, Chu said.”

And Dan Looker reported yesterday at Agriculture Online that, “At the Commodity Classic in Anaheim, California, Friday, a Washington expert who works with farmers on carbon policies tried to shatter some myths about cap and trade legislation still being considered in Congress.

“Laura Sands of the Clark Group, LLC, acknowledged the widespread fear of potential costs for farmers from a cap and trade law that would put limits on carbon emissions from major industries.”

Mr. Looker noted that, “Yet neither Washington nor the marketplace are going to drop efforts to control greenhouse gas emissions, [Sands] said…In about 4 or 5 years, Wal-Mart customers will be able to choose products based on the store’s sustainability rating.”

The article added that, “Even though Washington seems paralyzed, Sands doesn’t expect climate change legislation to die there.

“‘Nobody really believes this is a one administration issue,’ she said. In the past, Republicans had supported climate change legislation.”

Crop Insurance

In a recent column, “Inside Washington Today” author Jim Wiesemeyer included an “Open Letter to USDA and Members of Congress.” Mr. Wiesemeyer explained that, “This dispatch is an open letter from several crop insurance industry groups to USDA and Members of Congress regarding USDA’s proposed Standard Reinsurance Agreement (SRA) and other crop insurance issues. I’m giving these respected organizations space to get their viewpoints and perspective as wide as coverage as possible for several reasons — the most important being this topic is frequently raised during my many speeches throughout this country. I’m willing to run constructively written and signed responses to the following.”

In part, the letter that Mr. Wiesemeyer included stated that, “In 2008, a renegotiation of the Standard Reinsurance Agreement (SRA) was authorized in the Farm Bill because Members of Congress reasonably assumed that a renegotiation could achieve efficiencies in the delivery of federal crop insurance without doing the violence that Members feared would result from House and Senate floor amendments.

“Specifically, the Senate rejected an amendment to the Farm Bill proposing $2.3 billion in cuts to federal crop insurance by a vote of 63-32 (Record Vote Number: 428) and the House rejected an amendment proposing $2 billion in cuts by a vote of 250-175 (Roll no. 754).

“A review of the debate on the amendments, contained in the Congressional Record, reflects bicameral, bipartisan objections because the amendments, Members warned, involved damaging cuts that would harm federal crop insurance and the farmers and ranchers who depend on crop insurance to manage risk, cover losses, and obtain credit. (See H8771-8774, S15404-15412, S15418-15420).”

The letter explained that, “Now, fast forward to the U.S. Department of Agriculture’s (USDA) first and second SRA drafts that entail $8.4 billion and $6.9 billion in cuts to crop insurance, respectively.

“These cuts would come in addition to the $6 billion in cuts to crop insurance sustained in the 2008 Farm Bill, some of which are yet to be implemented, including the looming problems of delayed compensation to companies and early payment of premiums by producers.”

The update noted that, “Yet, the magnitude of the SRA cuts – three and four times deeper than the cuts rejected by the House and Senate as too deep – cannot be passed off as deficit reduction.

“As evidenced in the Administration’s FY2011 USDA Budget, mused about in media reports, and articulated by the Ranking Member of the Senate Committee on Agriculture, Nutrition, and Forestry, USDA simply plans to use the savings from the cuts to fund government programs and further shift the focus of the Department away from production agriculture.

“The level of cuts proposed by the first two drafts, the damaging policy underpinning the cuts, the appetite for increased spending on policies outside of agriculture, and USDA’s supplanting of any semblance of a contract negotiation with an unprecedented PR blitz all at least imply a process driven by extraneous demands for money with little regard to the policy consequences.”

After additional detailed analysis, the letter noted that, “Relative to risk sharing between companies and the government, the draft SRA does not simply require companies to take on greater risk but actually seeks to sharply reduce opportunity for potential profits, resulting in a 25% cut in expected underwriting gains and raising at least the question of whether the Department may be eying the nationalization of private sector crop insurance delivery with all its adverse implications for producers and taxpayers.

“In a private-public partnership, it is one thing to increase risk sharing but it is quite another to deny the potential for profit. As one news publication recently reported, the results of the SRA are ‘startling’ with average year profits for at least one company turning to losses and actual return on equity going into the red.

“Ironically, even as USDA focuses on reining in concentration in agricultural markets, its first and second draft SRAs may well result in the kind of massive consolidation it seeks to avoid.”

In conclusion, the letter included in Mr. Mr. Wiesemeyer’s column stated that, “Nevertheless, the Department at least appears determined to erase the advances made since 2000 under ARPA [Agricultural Risk Protection Act], devote the dollars elsewhere, and mark the biggest retreat in the progress of federal crop insurance in more than a half century.

“Given the ever-shrinking commodity title funding and repeated attacks on federal crop insurance, it is reasonable to ask: are we still committed to providing farmers and ranchers with a stable, long-term farm policy anymore or are we merely managing attrition?

“Given the economic condition of our country, the number of jobless Americans, and the overwhelming competitive edge that countries such as China already have, we sincerely hope that American food and fiber production capacity is not to be exported as our manufacturing jobs were a little more than a decade ago.

“In looking for answers to the question above, for rural Americans, the handling of federal crop insurance under the first and second drafts of the SRA is not at all reassuring.”

Keith Good

 Email This Post Posted by Keith Good • March, 8, 2010 • 5:13 am