Agriculture Committee Adopts Budget Views and Estimates Letter

The following press release was issued by the House Agriculture Committee on February 16, 2013:

Today, the House Agriculture Committee adopted the budget views and estimates letter which outlines the committee’s budget recommendations for the agencies and programs under its jurisdiction for fiscal year 2014. The letter will be submitted to House Budget Committee Chairman Paul Ryan as required by section 301(d) of the Congressional Budget Act of 1974, as well as House Rule X, clause 4(f).

In the letter, Chairman Frank Lucas and Ranking Member Collin Peterson write:

“[T]he Committee on Agriculture is dedicated to ensuring that the federal government continues to promote policies and risk management tools that will keep American agriculture and rural communities strong and our citizens healthy and safe. We also know that this country continues to face a fiscal crisis that, if not addressed, will not only harm the agricultural sector and rural America, but the country as a whole. The agriculture sector wants to be a part of the solution to our nation’s debt crisis….

“Recognizing the dire fiscal situation this country is in, we developed a bipartisan farm bill last summer that would have contributed substantially to deficit reduction while simultaneously reforming policies and providing risk management tools for the nation’s agricultural producers. The committee looks forward to continued hearings and input from Members to achieve the most fiscally responsible farm bill.”

The full letter can be accessed by visiting http://agriculture.house.gov/sites/republicans.agriculture.house.gov/files/pdf/business-meeting/BVEFY14final.pdf

Agriculture Has Slipped from D.C.’s Radar Screen (via Politico)

Trying to sell Ram trucks, Chrysler made a splash in the Super Bowl this month with a two-minute television spot celebrating the American farmer — a montage of handsome still photos and a vintage Paul Harvey speech all ending with the pitch: “For the farmer in all of us.”

Nine days later, the picture was very different as President Barack Obama skipped over farmers entirely in his State of the Union address, never mentioning the yearlong farm bill stalemate in Congress nor even including “agriculture” among the thousands of words spoken that night.

“It’s obviously not on their radar screen,” said Minnesota Rep. Collin Peterson, the ranking Democrat on the House Agriculture Committee. “The president and his people I don’t think even get it.”

The White House declined to speak on the record, referring questions to Agriculture Secretary Tom Vilsack. A spokesperson for the secretary told POLITICO that he remains convinced Obama truly wants a farm bill notwithstanding his silence. Ag trade groups smoothed over the slight by focusing on the president’s remarks regarding potential markets in Europe.

But the juxtaposition of the Super Bowl ad and State of the Union silence reflects a real disconnect in American politics over farm policy. And one that goes well beyond the president.

Chrysler’s marketers made a business decision to invest millions of dollars to identify with farmers, just as the automaker also aired a second two-minute spot for Jeep — this time celebrating U.S. troops coming home from wars overseas.

“We have used the largest television viewing audience to highlight the pride, the resilience and the determination that form an integral part of the American character,” said Sergio Marchionne, CEO for both Chrysler Group LLC and its principal owner, Fiat S.p.A. An accompanying news release speaks of the troops and farmers as “two groups whose work ethic, dedication and service have sustained the very fabric of this nation.”

Contrast that with Washington where in the middle of the worst drought in a generation, no farm bill was even brought to the floor of the House — an unprecedented delay for which Republicans paid little at the ballot box. Indeed, the year ended with Obama washing his hands of the whole matter and allowing Senate Minority Leader Mitch McConnell (R-Ky.) to pen a nine-month extension that infuriated many dairy farmers and left the two Ag committees out in the cold.

What is it that Chrysler sees that Washington doesn’t? Are these just modern Mad Men selling pickups to suburban men with farm fantasies?

Or is something bigger happening here in power politics? And is there a lesson that farmers themselves must learn from if they are to better market their importance to American consumers — and voters?

“It was a prideful moment out here in Ag country,” said Keith Alverson, a 32-year-old farmer in Lake County, S.D. “But we’re a small percentage of the population, and it’s clear we’re not connecting the way we used to. We have to find new ways.”

“No one is thinking about the promotion of agriculture in a big and bold way,” said one Republican aide who tracks farm issues. “There are numerous newsletters, coalitions, websites but they’re all serving the same audience. They’re essentially all singing to the choir, but no one is bringing any new folks to the church service.”

Politics is certainly part of it.   When Iowa was in play in the presidential election, Obama talked a good game on the farm bill last summer. But more than past administrations, this White House has taken a remarkably hands-off approach to farm issues — the chief exception being the first lady’s vegetable garden.

“Between the last two elections, clearly [Obama’s] support out in the countryside was minimal at best and these are folks who are very politically oriented,” said House Agriculture Committee Chairman Frank Lucas (R-Okla.). “So why worry about the people who are not part of your base, I guess.”

But Lucas — born into a family that has farmed for generations in Oklahoma — feels the same frustration with his own party leadership.

Boehner, a former member of the Ag panel and strong ally of dairy processors, blocked him from bringing the farm bill to the House floor last year. This week, with across-the-board cuts threatening the entire government on March 1, farm subsidies are back in the news but only as an alternative source of savings, not yet as a five-year bill.

At the House Republican retreat in Virginia, the farm bill was barely discussed. “We did not,” Lucas said. “Other than to mention it would be on the agenda this year.”

In fact, agriculture’s economic success in recent years has worked against the farm bill by sapping any sense of urgency. Net farm income jumped to $118 billion in 2011, dropped back in 2012, but is now predicted to soar to close to $128 billion in 2013.

Crop insurance payments — expected to reach close to $16 billion altogether — have helped offset losses from last summer’s drought. And as land prices rise, older Ag lawmakers complain that younger producers seem to have forgotten hard times and fret more about estate taxes — than the traditional safety net.

Indeed the cost of that safety net — as a percentage of federal spending — has shrunk considerably. The latest Congressional Budget Office estimates peg the 10-year costs at about $158 billion — less than 1 percent of what Washington will spend on other benefit programs.

In this context, Keith Collins, a former chief economist of the Agriculture Department and now an adviser to the crop insurance industry, says the costs are almost the equivalent of paying an “annual premium” on what amounts to food supply insurance for the nation.

“Agriculture has become so efficient, so few people actually raise the food … the American consumer has become almost like high school kids,” Lucas said. “It’s always been there, it will always be there. Dad can I have the keys to the car? Does the car have gas in it? Oh, it will always have gas in it, right Dad?”

The government loosely defines 2.3 million Americans as operating farmers but that is still less than 1 percent of the population. In fact, Vilsack has estimated that about three-quarters of the U.S. production comes from a subset of about 200,000 to 300,000 farmers.

The decline of regional newspapers — which were the heart of the old farm press — contributes to this isolation. Major publications largely ignored the farm bill debate last year, while many of the most experienced Ag reporters have migrated to more niche, subscriber-funded newsletters.

The secretary himself raised warnings in December even as the farm bill was collapsing.

“Far too few of us in this country fully understand agriculture,” Vilsack told the Chamber of Commerce. And in a more publicized speech at a Farm Journal forum, he warned that rural America must develop a “new mind-set” or risk becoming “less and less relevant to the politics of this country.”

“Some people were offended, thought it was too harsh. We didn’t,” said Pam Johnson, an Iowa farmer and president of the National Corn Growers Association. “We saw it as a call to action.”

Now in his 60s, Mike Geske farms with his son an estimated 2,100 acres of corn, soybeans, rice and occasionally cotton in Missouri.  If 2011 was a boom year for other farmers, it was one of his toughest, he told POLITICO — a reminder of all the vagaries of agriculture. And as a board member of the U.S. Farmers & Ranchers Alliance, he said he has seen in his own lifetime an ever-wider gap between farmers like his family and the rest of the nation.

“There’s now a whole generation of urban people that has never set foot on a farm.” Geske said. “Our focus is to try to connect with that consumer.”

This article can be accessed by visiting http://www.politico.com/story/2013/02/agriculture-has-slipped-from-dcs-radar-screen-88062_Page3.html#ixzz2M107lBDx

EPA Releases Producer Information To Animal Rights Groups (via Farm Futures)

NCBA and the National Pork Producers Council are both furious with EPA for handing extremist groups illegally gathered data on farmers who operate confined animal feeding operations.

NCBA said early this week it was notified by the EPA that the agency had been collecting information from states on CAFOs. The information was requested by extremist groups, including Earth Justice, the Pew Charitable Trust and the Natural Resources Defense Council through a Freedom of Information Act request and was given to them.

The information released by EPA covers livestock operations in more than 30 states, including many family farmers who feed less than 1,000 head and are not subject to regulation under the Clean Water Act.

“When we reviewed the information submitted by the states and released by EPA, we were alarmed at the detail of the information provided on hard working family farmers and ranchers, family operations including my own,” said NCBA past president J.D. Alexander, a cattle feeder from Pilger, Nebraska.

“It is beyond comprehension to me that with threats to my family from harassment atop bio-security concerns, that EPA would gather this information only to release it to these groups. This information details my family’s home address and geographic coordinates. The only thing it doesn’t do is chauffeur these extremists to my house. For some operations, even telephone numbers and deceased relatives are listed.”

The problem had recent roots in January 2012 when EPA proposed the Clean Water Act Section 308 CAFO Reporting rule to collect information from CAFOs and make it publicly available and readily searchable through their website.

Beef producers and even the Department of Homeland Security expressed concerns this was a serious overreach of EPA’s authority and would create a road map for activists to harass individual families. They also said the proposal would aid and abet terrorism and provide a very real threat to the nation’s food security.

The Pork Producers said the regulation was the result of a 2010 “sweetheart” deal between EPA and the environmental groups. It says the deal was struck while EPA and livestock and poultry producers were in the middle of a lawsuit brought by NPPC over EPA’s 2008 CAFO rule, which required large livestock and poultry operations that “propose to” or that “might” discharge into waterways to obtain Clean Water Act permits. A federal appeals court ruled that the CWA requires permits only for farms that actually discharge.

EPA withdrew the 308 rule on these grounds but then indicated it still wanted to collect data on CAFOs to “more effectively carry out its CAFO permitting programs on a national level and ensure that CAFOs are implementing practices to protect water quality and human health.”

NPPC said EPA then gathered the data from state water agencies without informing them about its intention to share the information with outside groups, including through a searchable national database.

NCBA said it has since learned that EPA still intends to use this gathered data to create a national searchable database of livestock operations, despite earlier objections and apparent agreements.

Alexander said this action by EPA just proves that our nation says it is concerned with national security, but does not care about personal small business security.

“Cattle producers won this issue with EPA’s decision to withdraw the rule and with the withdrawal we had hoped precautions would be taken by the agency to protect such information. Instead of protecting this information, EPA was compiling it in a nice package for these groups, all on the federal dole,” Alexander fumed.

With USDA threatening to shut down meat inspection to control spending, Alexander asked, how can EPA afford to compile all this data?

This story can be accessed by visiting http://farmfutures.com/story-epa-releases-producer-information-animal-rights-groups-0-95162

Spotlight: Minnesota FFA Foundation

Established in 1953, the Minnesota FFA Foundation, formally the Minnesota Future Farmers of America Foundation has a rich history of providing support to agricultural education. The Foundation secures support through individuals, chapters and businesses.

It is the mission of the Minnesota FFA Foundation to provide resources that promote and enhance premier leadership, personal development and career success for Minnesota youth in Agricultural Education.

Please visit http://www.mnffafoundation.org/ for more information regarding the Minnesota FFA Foundation.

Beginning Farms Participate Less Than Established Farms in Government Farm Payment Programs (via ERS)

Consistent with their commodity specializations, beginning farms—those whose operators have 10 or fewer years of farm operator experience—are less likely than more established farms to participate in Government direct-payment programs.  Most farm programs focus on cash grain production while relatively few beginning farms specialize in cash grains.  As a result, while they represented 22 percent of all farms in 2011, beginning farms accounted for only 14 percent of all farms that received Government payments, and received only 9 percent of all payments that year. However, beginning farmers and ranchers do avail themselves of other farm programs targeted at their needs, including farm loans, the Conservation Reserve Program’s Transition Incentive Program, and the Beginning Farmer and Rancher Development Program.

The full report can be accessed by visiting https://mail.google.com/mail/?shva=1#inbox/13d0251b8002af6e

Senators Offer Bill to Block EPA Waivers on Ethanol (via Agri-Pulse Communications)

Two Republican senators recently introduced legislation aiming to block Environmental Protection Agency waivers that allow an increase in the amount of ethanol that can be blended with gasoline.

The bill, introduced by Sen. Roger Wicker, R-Miss., and Sen. David Vitter, R-La., on Feb. 14, would overturn EPA waivers that allowed gasoline containing 15 percent ethanol (E15) to be used for many passenger cars and light trucks.

The senators said the higher blend of ethanol has been found to cause engine damage, reduce fuel efficiency, and contribute to higher corn prices.

The bill would prohibit EPA from granting any waiver for a blend above 10 percent ethanol and would repeal previous waivers.

“EPA’s flawed waivers allowing E15 amount to government bureaucrats issuing short-sighted regulations that negatively impact families and businesses across the country,” Wicker said. “The concerns surrounding E15 that existed prior to the waivers have increased instead of diminishing.”

Vitter said the EPA is “irresponsible” for allowing E15 to be used without sufficient testing.

“I support an all-inclusive energy strategy, but experimenting before understanding the consequences and potential cost of using E15 is unfair to consumers,” Vitter said.

Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, criticized the bill.

“Clearly the motivation behind the legislation introduced by Senators Wicker and Vitter is fueled by emotion and loyalty to home state oil constituents,” Dinneen said. “Now that ethanol represents ten percent of the American fuel supply and growing, oil companies are panicked.”

Dinneen said E15 is the most tested fuel in history, and ethanol  displaces many of the toxins and carcinogens found in traditional gasoline while delivering benefits such as a 35 to 49 percent reduction in greenhouse gas emissions.

To view the bill, visit: http://wicker.senate.gov/public/index.cfm?Fuseaction=Files.View&FileStore_id=c82fe883-51a0-4fc9-999e-51ec19f4b85a

 

Kaptur Bill Would Protect Seed Patents, Farmers (via Roll Call)

An Ohio lawmaker says her legislation could provide a middle ground for companies such as Monsanto Co. that want to protect their patented seed from infringement and farmers who want to save and plant genetically engineered seed without fear of a conglomerate suing them.

But Rep. Marcy Kaptur, a senior Democratic appropriator, has had little luck moving the bill she first introduced in 2004. She filed the legislation (HR 193) again in January, making this the fourth Congress in which she has offered it.

Her legislation would make the Agriculture Department the go-between for companies and farmers. The department would set and collect royalty fees from growers who register to plant first-generation patented seeds or their progeny saved from prior harvests. Additional duties would be placed on the product of patented seed imported from countries where royalty fees don’t exist or are lower than in the United States. Farmers who registered and paid fees could not be sued.

“We would protect patent rights, but USDA would establish fees.” Kaptur said last week. “Companies deserve a fair return, not an exorbitant return.”

She said she would expect the fees to be lower than those now charged by Monsanto and other companies. “USDA would be the market-maker,” Kaptur said, an idea unlikely to gain traction in a pro-business House.

Her legislation was inspired by complaints from Midwestern farmers who discovered on a trip to Latin America that their counterparts were not paying the technology fees on patented genetically modified seeds.

Kaptur’s bill attracted the notice of Christopher M. Holman, a University of Missouri law professor who has submitted a friend-of-the-court brief in support of Monsanto’s case against soybean farmer Vernon Hugh Bowman. The Supreme Court will hear arguments in the case Feb. 19.

Holman does not endorse Kaptur’s proposal but wrote that the bill shows “Congress is well aware of the issues presented by the petitioner and his amici, and will no doubt address them if such action is deemed necessary.”

Kaptur said she is also concerned about Monsanto’s argument that its control of seed remains in force for the duration of its patents because the engineered trait is present in each new generation of seed.

“Monsanto did not invent the soybean. God did,” she said. “I’m not completely on board with the idea that any company should control to that extent the reproduction of a food crop.”

Farmer’s Use of Modified Seeds Reaches Supreme Court (via Roll Call)

By developing and inserting a glyphosate- resistant gene into plant DNA, Monsanto Co. has created premium seeds of soybean, canola and cotton able to withstand its Roundup herbicides and similar weed killers.

In the agribusiness world, Monsanto is known as an aggressive enforcer of restrictions on farmers’ use of its patented line of genetically engineered crops. Now the St. Louis-based conglomerate is in a showdown with a southern Indiana farmer that will play out this month in the U.S. Supreme Court.

At issue is Vernon Hugh Bowman’s argument that Monsanto lost the right to keep him from planting Roundup Ready soybean seeds he bought from a grain elevator. The seeds came from soybean growers who had harvested and sold second-generation seed to the elevator, which in turn sold them to Bowman.

It’s an argument Bowman lost in a federal district court and on appeal. They found that Bowman owed the company $84,456 as compensation for patent infringement.

But Bowman, now 75, raised a question in his petition to the Supreme Court for a review that piqued the justices’ interest. They ignored the solicitor general’s advice to reject the case and are set to hear oral arguments Feb. 19.

The Office of the Solicitor General, Biotechnology Industry Organization, Software Alliance and the American Soybean Association, among others, have lined up in support of Monsanto’s argument that a decision for Bowman could undermine patent protections for man-made cell lines, nanotechnology, electronic software development and other self-replicating products.

Bowman has the support of the National Farmers Union, Center for Food Safety, American Antitrust Institute, the Automotive Aftermarket Industry Association and the Public Patent Foundation. The groups say a court decision in favor of Monsanto will give patent holders undue control in the distribution and use of their products. Competition, they argue, will suffer.

Lawyer Mark P. Walters, a Seattle patent attorney who worked his way through law school in a university seed lab, will make the arguments for Bowman. It will be his first appearance before the high court. To fight back, Monsanto has brought out President Bill Clinton’s former solicitor general, Seth P. Waxman. Test of Patent Law This is the first time the Supreme Court has reviewed a Monsanto lawsuit against a farmer for alleged violations of company restrictions on using the progeny of patented seeds to produce additional crop. Generally, the cases end when Monsanto wins in the lower courts.

There will be no discussion of “Frankenfoods,” the pejorative term opponents of genetically modified crops often use to describe products by Monsanto, DuPont and Syngenta. Nor will the case turn on genetically modified organism proponents’ arguments about the benefits to food production of having herbicide resistant food crops.

The case revolves around federal patent law and what limits apply. Bowman argues that he followed the restrictions he agreed to in the technology licensing agreements he signed when he bought Roundup Ready seeds when he planted his first soybean crop each season. Under those agreements, Bowman says, the patent and contract restrictions on harvesting seed for planting were in force.

But he draws the line at bulk commodity seeds — a grab bag of soybean seeds — he bought more cheaply from a local grain elevator for several years for late-season plantings. Bowman says he chose the commodity seeds because late-season planting is a greater gamble because of unpredictable weather and he wanted to limit his investment. When he harvested and sold crops, he saved some of the seed for subsequent planting.

The elevator did not segregate Monsanto seeds and Bowman ended up with Roundup Ready seeds. In court documents, he said he had expected the bag to include such seeds and had raised seedlings whose resistance he tested by spraying with weed killer. Over nine years, he culled and perfected the quality of seeds he used for the late-season plantings.

Bowman argues that Monsanto’s patent right was exhausted with the seed sale to the farmers who sold their seed to the grain elevator.

Walters dismissed claims that a victory by his client would broadly endanger patent protections for self-replicating technologies, calling them “completely exaggerated.”

“No other self-replicating technology is distributed like seeds,” he said. “There is no other self-replicating technology that is going to be dumped into a grain elevator mixed with everybody else’s production and then available for sale to the public.”

He said most self-replicating technologies are distributed under tight restrictions.

Walters said there are strong parallels between Bowman’s case and one involving a computer company that prevailed in a 2008 Supreme Court decision. The court found that the company did not violate a chip maker’s patent rights when it bought the company’s product from a third party and combined them with other components to make computers. The court said the patent holder’s restrictions on the computer chip use ended with the sale.

“Monsanto is saying the [rights to] subsequent generations are not sold so you can’t exhaust them. We’re saying like the method is embodied in the computer chip, the subsequent generations are embodied in that first generation. When you sell that first generation, you’re not only selling that generation but the ability to use that seed to make other generations,” Walters said.

“Just like when you sold the computer chip, you sold not only the chip but the ability to use that chip to practice the method,” Walters said.

Not so, Monsanto’s general counsel David F. Snively says. The company’s patent protections do not end with a sale. The engineered trait, which the company has invested millions of dollars in creating, is carried in harvested seeds and continues to provide resistance to pesticides if planted.

The fact that Bowman got the seed from a grain elevator and not Monsanto or an approved distributor changes nothing, Snively says. The company allows growers who have signed technology agreements to sell their harvest for animal feed or other products. The agreements expressly prohibit the farmers from saving seed from their harvests to produce new crops.

“The patent law in this country individually gives you the right to regulate the sale of an article, the making of an article,” Snively said. “Clearly, the patent law doesn’t authorize an evasion of those patent rights by sourcing the materials from somewhere else.”

He likened it to claiming that a private sale of a computer operating system enables the buyer to make copies for a commercial basis.

Snively said Monsanto imposes what it considers to be reasonable limits on replanting of its patented seeds to keep farmers “from going off and taking the technology as if it is their own and going into business.”

The company believes it will win in the Supreme Court, he said, adding that a loss would affect not only his industry but also research universities and technology companies.

“We’re completely confident that the court is going to sort through this and define intellectual property rights in a way so that all farmers know where everybody stands on this,” he said.

This article can accessed by visiting http://www.rollcall.com/news/farmers_use_of_modified_seeds_reaches_supreme_court-222292-1.html?pg=1

Cattlemen Brace for Another Year of Unpredictable Weather and Regulations (via Agri-Pulse Communications)

National Cattlemen’s Beef Association (NCBA) 2013 President Scott George said the most vital issue for his members is the drought impacting all sectors of the cattle and beef industry, a perspective that is reflected in the CattleFax 2013 Outlook.

Analysts reported that total cattle numbers have declined more than 7 million head in the past six years and are now below 90 million head for the first time since the early 1950s. CattleFax Senior Analyst Kevin Good predicted per-capita supply will decline 2.2 percent. The Wholesale Beef Demand Index will decline by 1 percent, due to a 1 percent decline in real income of consumers.

“The challenge will be commanding additional dollars from consumers through the supply reduction,” noted CattleFax during the NCBA’s 2013 Cattle Industry Convention. CattleFax analysts said a one percent decline in disposable incomes is forecast in 2013, which is the first decline in consumer incomes since the 2009 recession, “creating possibly the biggest threat to beef demand since that time.”   The low cattle numbers will mean higher prices and consumer preference for a cheaper product, noted George. He said the Beef Checkoff addresses this challenge by developing new products, like the Flatiron steak.

“Our checkoff addresses the consumer concerns,” he said. “And they’ll continue to get that message out to them about the nutrition and essential nutrients in beef.”

NCBA CEO Forrest Roberts told the Board of Directors that the goal over the next year will be to increase the beef consumption of the millennials, or those 80 million people ranging from age 13 to 33, from two times per week to three or more times per week.

Additionally, he said the millennial generation has more questions about how their food is raised. “Sustainable growth starts by building trust,” Roberts said. “You do that by being incredibly transparent.”

However, he acknowledged a “crossroads” for the industry, which includes significant challenges from Mother Nature over the past three to five years.

CattleFax noted that retailers will struggle to feature beef in advertisements due to higher prices and the industry should expect a four percent drop in beef advertising. “A fragile domestic economy and lagging consumer incomes will limit expansion,” the analysts projected.

The drought, which has affected more than 70 percent of cattle country, as well as decreased herd size and high feed and input costs will result in a guaranteed higher price for the consumer, noted 2012 NCBA President JD Alexander. “Record prices by no means guarantee profit,” he added. “We’re operating on most cases right now on pretty substantial losses.”

According to Professor Emeritus Art Douglas of Creighton University, dryness will likely persist in the West and Southern Plains this spring, due to continued La Nina conditions. He noted that there is a chance the eastern corn belt of the United States will see a return to more normal precipitation patterns during the upcoming growing season.

The difficult weather and economic conditions for the industry make it particularly important to pass legislation for haying and grazing on federal lands, noted George. The “Grazing Improvement Act.” introduced by Sen. John Barrasso, R-Wyo., last week extends Bureau of Land Management and Forest Service Livestock grazing permits from 10 to 20 years for permits completed under the National Environmental Protection Act (NEPA), among other provisions.

“Our cattlemen are great stewards, providing benefits to society that some people don’t recognize,” said George, noting that some federal lands used by ranching cattlemen are “in better shape than they were 50 years ago.”

He said federal land usage is one of the biggest priorities for cattlemen in the West.

A dairyman as well as a beef producer, George runs his operation with two brothers and five nephews. “We have to do teamwork, we have to have some rise and up and take responsibility for certain things, and I see this opportunity at the national level,” he said. “NCBA has producers from all segments and all walks of life. It’s literally an effort of teamwork between the members and staffers,” he added. “We have staffers focused on building demand and we have staffers looking at laws and regulations.”

When it comes to regulatory agencies of the federal government, particularly the Environmental Protection Agency (EPA), Alexander said he “firmly believes they’ll be going full steam ahead” in the next four years. “Even these rules we’ve been successful in blocking before, I wouldn’t be surprised if they come up again.”

CEO Roberts said the NCBA policy team faces pressures “on a day-to-day basis” that consist of defending against “the actions of regulations” instead of the “the forming of legislation.”

“A good offense is not well-rounded unless you have a good defensive plan,” he said.

Alexander added that when it comes to choosing battles to fight for the industry, “we look at every aspect, good, bad and indifferent. We’re going to be there at every one,” he said. “Sometimes the most insignificant issues snowball into huge problems for the industry.”

Alexander handed off the NCBA presidency to George during Board of Directors meeting at the Cattle Industry Convention. “I loved every minute of it,” he said of his year serving as head of NCBA during an interview with Agri-Pulse. “The highlight was going to all the different states meeting producers of all walks of life. I like to say: we’re all in this together but we all do it different.”

#30

For more news, go to www.agri-pulse.com

List of Alternatives Being Discussed to Reduce Farm Premium Subsidies in Crop Insurance (via FarmDocDaily)

Cost of crop insurance programs may be an issue this year, either via the farm bill or other legislation. Regardless, discussion of its cost is increasing. Moreover, it seems likely that the cost of crop insurance will become more prominent in future farm safety net discussions. The reason is simple: it is the largest cost program in the farm safety net. Moreover, crop insurance is no longer a small spending program. U.S. policy deliberations differ for large and small spending programs. Discussions of small spending programs focus on the program’s value to beneficiaries. In contrast, discussions of large spending programs focus on whether the program is fair and appropriate for both beneficiaries and the U.S. public.

This paper’s objective is to make readers aware of the variety of discussions that are going on with regard to alternatives for reducing the cost of farm premium subsidies, the largest cost item in crop insurance. This list contains alternatives that the authors have heard mentioned. They are roughly presented in order of potential cost savings. The discussion is not comprehensive, nor does it consider whether cuts will occur this year or in the future as well as whether cuts will be made elsewhere in the farm safety net, including crop insurance administrative and operating expense. The list is not meant as recommendations; its purpose is to make you aware of the discussion.

Each alternative may impact the actuarial soundness of crop insurance, the possibility that ad hoc disaster assistance is provided, and different crops and areas of the country differentially. It is important to assess these impacts so that a better informed decision is made. A few selected examples are provided as illustrations of the type of analyses that would be desirable.

Subsidize only Yield Risk Insurance

This alternative stems from a policy philosophical question: Since farmers have access to private market alternatives for price protection (futures, options, forward contracts, etc.), should government also provide price protection? In contrast, the private market offers few contracts to protect against yield decline. Dr. Bruce Babcock of Iowa State University has estimated that yield-only insurance would have reduced the cost of farm premium subsidies by around 50% for the 2011 crops (see here).

Increase the Share of Premium Paid by Farms

This alternative stems from the question whether the decline in the share of premium paid by farms has gone too far: from 74% in the early 1990s to 37% in 2012? (see graph) Size of the savings will depend on the size of the subsidy reduction and whether the reduction is uniform or differentiated by product and coverage level. A related question is whether CAT (catastrophic) insurance should remain free?

Offer Revenue-Only Insurance

This alternative stems from a policy philosophical question: What type of insurance does the public think is fair to support? Revenue-only insurance would base payments on whether revenue at harvest is less than expected revenue, less the deductible. It would be similar to Revenue Protection without the harvest price option A simple analysis using trendline state yields (from National Agricultural Statistics Service) and insurance prices for 1974-2012 for corn, soybeans, sorghum, upland cotton, rice, and wheat (Chicago wheat price) suggests revenue-only insurance would reduce federal expenditures on farm premium subsidies by 25% to 40%. Eliminating HPO might lead to less forward contracting by farms, but the current HPO subsidy may be leading to too much forward contracting. Eliminating HPO also would reduce the value of crop insurance for farms that feed their crops to livestock.   Reduce Cost of HPO

The cost of HPO could be reduced by having a lower subsidy rate for it or by limiting the amount of production eligible for subsidized HPO. For example, subsidized HPO could be limited to 30% of expected yield or could be limited to farms that grow feed for livestock on their farm. HPO would still be available at an unsubsidized rate for other production.

Vary Subsidy Rate by Size of Farm

This alternative arises from a policy philosophical question: Should large farms receive the same subsidy as small farms? This issue repeatedly appears in farm policy debates and is the underlying reason payment limits exist for most other farm safety net programs. The U.S. Senate’s 2012 Farm Bill contained a provision sponsored by Senators Tom Coburn, Republican of Oklahoma, and Richard Durbin, Democrat of Illinois, to reduce the premium subsidy by 15% for farmers (or legal entities) with adjusted gross income above $750,000. Reducing the subsidy for large farms may cause insurance premiums to increase for all farms if farms that exceed the limit generate gains for insurance and if higher farm-paid premiums cause them to self-insure instead of buying insurance.

Change Crop Insurance Parameters Related to Individual Situations — examples are (1) lower payment rates for prevented planted acres and (2) lower minimum insurance t-yield. These types of changes will differentially affect farms based on the probability that the situation happens to them. For example, farms in areas of the country in which prevented planting is more common will be most affected by reducing the payment rate for prevented planting.

Eliminate Optional Insurance Units

This alternative arises from a policy philosophical question: What is the appropriate farm area unit on which to place a subsidy? The extremes are the individual field (i.e., optional units) and the whole farm. Eliminating optional unit transfers more risk management to the individual farm because the loss in any one field is averaged across a larger area, such as the farm enterprise unit or whole farm. Variability of production is greater at the field than at the enterprise or whole farm level. Hence, this change should reduce insurance payouts and thus the cost of the insurance program.

Improve Underwriting and Adjust Rates on the Assigned Risk Pool

An example that falls under this approach is to put a farm premium surcharge on policies that companies put in the assigned risk pool. Policies are usually assigned to the assigned risk pool because companies think the policies are underrated or needs more underwriting. Hence, it is not unreasonable to ask if these policies should pay a premium surcharge. Another example is to ask if the Risk Management Agency can better incorporate the accumulating data on individual performance. Many fields and farms now have 10 years plus of crop insurance performance data.

Enact Conservation Compliance for Crop Insurance

Requiring conservation compliance will reduce the cost of crop insurance. Some farms will opt not to meet conservation compliance and thus will be ineligible for the insurance subsidy. Savings are likely to be modest but might be meaningful when environmental benefits are included.

The paper is also available at http://aede.osu.edu/publications

and http://www.agmanager.info/crops/insurance/risk_mgt/rm_pdf13/AB_Alternatives.pdf

Issued by Carl Zulauf  Department of Agricultural, Environmental and Development Economics  The Ohio State University

and

Gary Schnitkey  Department of Agricultural and Consumer Economics University of Illinois

and

Art Barnaby  Department of Agricultural Economics  Kansas State University