Opinion: Farm Credit – Fulfilling its mission to rural communities (via Agri-Pulse)

Several years of low commodity prices are making life difficult on the farm, and small towns across the country face serious challenges to modernize their infrastructure. Regardless, America’s farmers, ranchers and rural families remain optimistic. They are working hard to make ends meet and provide opportunities in agriculture and other rural businesses for the next generation.

Times like these highlight the value of Farm Credit’s mission. Farm Credit supports rural communities and agriculture with reliable, consistent credit and financial services, today and tomorrow. We help these areas grow and thrive by financing vital infrastructure and communication services and providing farmers and agribusinesses with the capital they need to be successful.

Because a steady flow of credit means more jobs and economic growth, Farm Credit helps ensure the vibrancy of communities throughout rural America – an especially important task given the current downturn in the farm economy. That has been our mission for more than 100 years and we are proud to share our story today with the House Agriculture Committee.

Farm Credit is a nationwide network of 77 customer-owned lending institutions that all share a critical mission. These independent, cooperatively-owned institutions lend to farmers, ranchers, farmer-owned cooperatives and other agribusinesses, rural homebuyers and infrastructure providers throughout rural America.

The loans we make support our mission. Whether helping a young farm family begin its operation, supporting our veterans as they return home and take up farming or financing U.S. agricultural exports around the globe, Farm Credit is committed to the success of American agriculture.

Farm Credit’s mission beyond agriculture is just as important. Rural homebuyers face obstacles unknown in more urban settings, and Farm Credit provides loans tailored to these unique circumstances. Farm Credit finances companies that provide vital infrastructure to rural communities, helping bring clean water to rural families, reliable energy to farms and rural towns and broadband that connects rural America to the rest of the world. Modern infrastructure makes rural communities competitive, provides jobs and helps improve the quality of life for rural families.

Farm Credit fulfills its mission without federal funding. We raise money from Wall Street and put it to work on farms, ranches and in rural communities.

This also is a time when supporting key programs such as crop insurance, the current farm bill, the renewable fuels standard and promoting strong export markets has never been more important to maintaining the viability of the industry. Passage of a strong Farm Bill next year is essential.

Rural communities and agriculture are at the heart of what we do. And a constant supply of credit to our customer-owners helps make agriculture one of the driving engines for the U.S. economy and enables our nation’s agricultural producers to feed a hungry world.

Every day Farm Credit is focused solely on its customers and our mission remains as important today as it was when we made our first loan more than 100 years ago. Farm Credit is committed to its customer-owners in good times and bad and we will honor that commitment today and tomorrow.

Jimmy Dodson is chairman of the Farm Credit Bank of Texas and a third-generation farmer, raising cotton, corn, wheat, hay and grain sorghum near Corpus Christi, Texas.

Tom Halverson is president and CEO of CoBank.

Doug Stark is president and CEO of Farm Credit Services of America and Frontier Farm Credit.

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Milk producers warned of unrealistic cost estimate for program change (via Agri-Pulse)

Congressional budget analysts estimate that a key change sought by dairy producers to the Margin Protection Program could cost more than $2 billion, a price tag that leaders of the House Agriculture Committee said is unrealistic.

“I don’t want expectations to outrun what we can actually get done,” Chairman Mike Conaway, R-Texas, said at a hearing Wednesday on dairy policy. He said it’s “not rational to be able to add that kind of resources” to MPP.

“I don’t know where we’re going to find that” amount of money, said the committee’s ranking Democrat, Collin Peterson of Minnesota.

Both lawmakers argued that MPP is currently inadequate to protect the industry, and they also questioned whether the Congressional Budget Office estimate was accurate. The CBO estimate, which has not been released publicly, was prepared for the committee’s use.

The National Milk Producers Federation is asking Congress to reverse a 10-percent cut that was made during drafting of the 2014 farm bill in the feed cost formula that’s used to calculate the margin between milk prices and feed costs. MPP makes payments to producers when the margin falls below minimum levels.

The proposal is one of a series NMPF has made to make MPP more attractive to producers. Other proposals include lowering premiums for buy-up coverage and expanding the collection of data on corn, soybean meal and alfalfa prices that are used to calculate feed costs.

The current program, for example, only uses the average price of soybean meal at Decatur, Illinois. NMPF wants to include all soybean-meal price data collected by USDA’s Agricultural Marketing Service.

“Let’s get the policy right and then address the cost of it. We’re not looking to have an expensive program,” Jim Mulhern, NMPF’s president and CEO.

Producers “continue to be on the same challenging roller-coaster ride we’ve been on for the last 15 years,” Mulhern said. “We’re once again in a downward slump in our industry.”

He said after the hearing that he had not seen the CBO estimate.

MPP coverage levels vary from a margin of $4 to $8 per hundredweight. The $4 level requires only a $100 annual fee. Higher levels of coverage require farms to pay a premium. Enrollment in buy-up coverage has fallen sharply, from 39 percent in 2015 to 12 percent last year and just 2 percent this year.

The American Farm Bureau Federation estimated that producers’ margins would have been $1 per hundredweight lower in 2015 and 2016 had the farm bill increased the feed formula by 10 percent. That would have resulted in payments of $36 million in 2016, based on the limited purchase of buy-up coverage that year. Payments could have been significantly higher if more farms had purchased higher levels of coverage.

The formula was reduced during deliberations on the farm bill in 2012 to reduce the program’s potential cost.

Rep. Ann Kuster, D-N.H., told Mulhern that her state lost 19 dairy farms last year, partly because of a drought, and she expressed concern that producers had lost interest in MPP and wouldn’t sign up for even a revamped version.

“All it’s going to take is for one year of the program working for people,” Mulhern responded. Farmers “will see these changes and will make the program the safety net we’ve all wanted.”

NMPF is no longer seeking supply management provisions, an issue that put the organization at odds with dairy processors and led to a battle between Peterson and then-House Speaker John Boehner, a fight Peterson ultimately lost. Peterson now says that the supply management provision would have never been used anyway, making it a wasted effort on his part.

But producers and processors are divided over an effort by the International Dairy Foods Association to allow forward contracting for fluid milk. Producers fear that it will lower the prices they are paid. Prices for fluid milk are currently based on a local differential above the prices for Class 3 or Class 4 milk, the types used for cheese, butter and nonfat dry milk.

Michael Dykes, president and CEO of the International Dairy Foods Association, told the committee his group would be discussing the issue with NMPF. He also said his group would support changes to the MPP as long as they aren’t market distorting, a reference to the supply-management dispute.

Dykes asked the committee to expand the Food Insecurity Nutrition Incentives (FINI) grant program to include dairy products. The pilot program, created by the 2014 farm bill, funds projects that provide incentives to Supplemental Nutrition Assistance Program recipients to buy fruits and vegetables. The program has no funding after 2018.

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Mexico is the leading destination for U.S. dairy products powder (via USDA Economic Research Service)

Mexico is the leading destination for U.S. dairy products powder

Mexico has consistently been the leading export destination for U.S. dairy products, with the combination of nonfat dry milk (NDM) and skim milk powder (SMP) as the top export product. (NDM and SMP are two very similar products grouped together in export data.) In 2016, 54 percent of NDM/SMP produced in the United States was exported, and 43 percent of these exports went to Mexico. However, there is a great deal of uncertainty concerning the future of exports to Mexico due to a strong dollar and possible changes in trade policy. The United States accounted for 94 percent of Mexico’s imports of NDM/SMP in 2016. Other sources included New Zealand, Spain, Canada, and Germany. If Mexico were to reduce imports from the United States, those countries would be in a better position to increase their share of trade. This chart appears in the ERS Livestock, Dairy, and Poultry Outlook report released in March 2017.

Policy To-Do List for Ag (via AgWeb)

The policy issues under serious discussion in Washington, D.C., are many, but two in particular top the list of priorities for U.S. farmers—immigration and trade—according to Mary Kay Thatcher, senior director of congressional relations for the American Farm Bureau Federation (AFBF). While farm lobbyists watch those issues play out, rumors swirl about the fate of the Renewable Fuel Standard and hope is high tax reform is on the way.

Immigration

Thatcher was recently asked to rate, from 1 to 10, the “uncertainty and nervousness” concerning potential changes to immigration and their effect on agriculture.

“We’re at a 10,” she says, referring to a report that authorities had rounded up undocumented workers on a farm in Michigan. “I think [on-farm enforcement] is starting with regularity across the country,” she adds.

Amid stepped-up immigration actions in areas with heavy undocumented populations, the Trump administration has issued two executive orders clamping down on travel and immigration. Farm groups such as AFBF and National Farmers Union (NFU) are analyzing the executive branch’s actions to weigh their potential impact on agriculture.

Farm Bureau and NFU, often at odds ideologically, are in lockstep as they lobby lawmakers on the importance of immigrant labor to ag sectors such as dairy and fruit and vegetables, according to Zack Clark, government representative for NFU.

Clark says the Trump administration has changed its approach to the issue. “We initially thought there’d be an appreciation for the uniqueness of agriculture,” he says of the administration. “It seems [now] that’s not the case.”

All of agriculture should get the word out about the importance of immigrant labor, Thatcher says. “For corn, soybean, wheat and sorghum farmers, it’s not exactly the biggest thing on your plate. But it’s incredibly important to dairy, the fruit and vegetable industry and others, so we can use all the help we can get.”

Trade

President Trump’s promised talks renegotiating the North American Free Trade Agreement (NAFTA) with Canada and Mexico are approaching. The pact is credited with quadrupling the value of U.S. food and ag exports to both countries since it took effect in 1994. “We don’t want to mess that up,” Thatcher says, citing reports Mexico is threatening to turn to U.S. rivals Brazil and Argentina for corn.

Clark says the threats “are largely rhetoric because they just don’t have the capacity to deliver to

Mexico.” He also says the “America First” approach doesn’t make it easy to get partners to the table. “[They’re] getting mad and they’re going to take it out on us,” he says.

Once talks start, the result isn’t clear. “When we say, ‘We want X, Y and Z,’ then Canada will want at least three or four things and Mexico will want three or four things,” Thatcher says. “So while there might be beneficiaries, there’s going to be some losers.”

Regarding the now-rejected Trans-Pacific Partnership (TPP), Agri-Pulse Editor Sara Wyant says there’s an expectation bilateral deals will be the only path forward, but she jokingly suggested the administration could rename the existing deal, make a few changes and send it out again. “It could be a rebranded multilateral [trade deal] in a different shape,” Wyant says.

Taxes

The path to a possible repeal of the estate tax is pretty clear, at least to some. “I think we’ve got as good a chance as we’ve had in, I don’t know, ever,” Thatcher states. “It’s all about trade-offs. But I feel positive we can make some real progress.”

NFU opposes a repeal, calling it a tax on the less than 1%. “There is a very small percentage of people who are impacted, so we should keep that in mind,” Clark says.

Farm Bill

While work ramps up on the next farm bill, U.S. House Agriculture Committee Chairman Mike Conaway is pledging this one, unlike the previous version, will be approved on time.

Conaway, R-Texas, and counterpart Collin Peterson, D-Minn., have asked the House Budget Committee to hold farm programs “to the same resources we got in 2014,” Conaway says. Low commodity prices and falling farm income ought to help make the case for urgency. The current farm bill expires fall 2018.

Will agriculture be expected to offer budget offsets at a time when the Trump administration is facing record debt while promising huge investments in infrastructure and the military?

“[We’re] $20 trillion in debt, and the president has proposed a lot of new spending. There’s a lot of balls in the air,” Conaway says. At this stage, it’s not entirely clear how the process will play out, he adds.

One thing that’s clear is with new spending comes new cuts. “If you’re going to ask for something new, then you’re going to have to tell me where we take money away,” he says.

Trump reaffirms support for ethanol in industry letter (via The Hill)

President Trump reiterated his support for the federal ethanol fuels mandate in a letter to industry supporters on Tuesday.

Addressing attendees at the National Ethanol Conference, Trump said in a letter that he “value[s] the importance of renewable fuels to America’s economy and to our energy independence.”

He promised to work with the industry’s Renewable Fuels Association (RFA) to “identify and reform” regulations on the industry, which he said “has suffered from overzealous, job-killing regulation.”

Trump added, “As I emphasized throughout my campaign, renewable fuels are essential to America’s energy strategy.”

Trump supported the Renewable Fuels Standard throughout his campaign, a position he refined during a second-place effort in the Iowa caucuses.

Despite Trump’s letter, some officials in his administration have signaled support for reforming the Renewable Fuel Standard.

Trump adviser Carl Icahn, an investor whose holding company owns a major stake in a fuel refiner, is pushing to reform the RFS’s “point of obligation,” which assigns refiners the responsibility of complying with ethanol blending mandates under the law.

Opponents of new Environmental Protection Agency Administrator Scott Pruitt have noted his ties to the oil industry during his time as Oklahoma’s attorney general. But he told senators during a confirmation hearing last month that he would implement the mandate, which Congress updated in 2007.

Ethanol supporters cheered Trump’s letter on Tuesday.

In a statement, RFA President Bob Dinneen said the RFS mandate “has cleaned the air, reduced our dependence on foreign oil and boosted local economies.”

Donald Trump understands all this,” he said. “Consumers benefit from this national policy and our industry looks forward to continuing to be the lowest cost, highest octane fuel in the world.