Policy: Subsidies, Crop Insurance, Death Tax
Earlier this week, Politico’s Jason Huffman and Bill Tomson sat down with Secretary of Agriculture Tom Vilsack “to celebrate the one-year anniversary of the 2014 Farm Bill.” A video replay of this discussion is available here, while an unofficial FarmPolicy.comtranscript of the interview can be found here.
- In part, Sec. Vilsack indicated that, “I think basically what Congress had a difficult time determining is when a non-farm family individual is actively engaged in farming enough so that they qualify to participate in some of the safety net programs. This is a notion of actively engaged, who is actively engaged in terms of providing management responsibilities.
“This involves a very narrow percentage of folks who are in the business of farming, primarily limited partnerships, general partnerships. It doesn’t involve family farms, it doesn’t involve family farm corporations. So our expectation is that probably one to two percent, or perhaps even fewer of the overall farmers are going to be impacted by however we define actively engaged.”
Sec. Vislack added that, “We’re working through that process and I think we have a pretty good handle on it. We’re working it through the regulatory process right now, and I would anticipate and expect sometime in 2015, relatively shortly, we’ll be coming out with how we define it and asking for comment on whether or not we’ve got it right or not.
“The reality is that this has been a loophole that has been utilized by folks in partnerships to allow for many, many, many people to qualify as actively engaged, when in fact they might be only engaged in a conference call or in a very narrow sense participating in the decision-making in a farming operation. So we will close that loophole to the extent that we can, but Congress is not giving us a whole lot of room to do that.”
Sec. Vilsack also noted that, “The expectation and anticipation was that the agricultural risk coverage program and the price lost coverage program would not be triggered until a couple years down the road, and when they were triggered, commodity prices were expected to be a lot higher than they are today. So we’re going to see assistance and help occurring earlier, and because of the deep decline in many commodity prices, probably going to see potentially double what we anticipated and expected in the next couple of years. That’s essentially going to eat into the projected savings on the safety net side.
“On the nutrition side, there were expectations that we would save money as well, and I think we’ll actually do…we actually will save money on the nutrition side, but perhaps in a slightly different way. I think the expectation there was that closing the loophole, the low income heating assistance loophole, would result in savings, but I think we’re likely to see more savings coming from the fact that there are fewer people in need of SNAP, and over time, as the economy improves, we’ll probably see continued declines in SNAP participation, saving money.”
On the idea of separating nutrition provisions from farm program items in a future Farm Bill, Sec. Vilsack indicated that, “…but I don’t think the idea of separating the two is going to be particularly effective. I think, frankly, it will make it much more difficult in the future for farm bills to be passed if, in fact, there is a separation. I think there is a good, longstanding coalition between urban and rural interests when we discuss and debate farm bills, and the reality is we did get a farm bill through the process, and one of the few major legislative accomplishments of the last Congress, so I’m confident that in the future we’ll continue to see farm bills passed.”
- With respect to crop insurance issues, Sec. Vilack noted that, “One of those reforms would be to take a look at what the average rate of return is on crop insurance. Today it’s roughly 14, 15% on average of return on investment. The reality is that this entity and this operation could be quite effective at a 12% return on investment, and I think most taxpayers would be happy if their portfolio was growing by 12%. So I think first and foremost it’s a question of what’s a reasonable rate of return in a government sponsored and government supported program.
“Secondly, to the extent that we are currently subsidizing crop insurance, which is to say that we, as the federal government, and taxpayers, pay, for example, in the revenue programs that have a harvest loss protection, we pay roughly 62% of the premium and the farmers pay 38%. The President has suggested that it needs to be more of a 50-50 split and he’s proposed a reduction in the level of subsidy. There is also–and by the way, that’s very consistent with what the General Accounting Office suggested we should be looking at from the congressional side.”
Sec. Vilack added that, “Do we want to cut back on ARC and PLC? Probably not. Is there an opportunity for discussion about crop insurance? There seems to be bipartisan…a series of questions from a bipartisan group of senators and representatives about crop insurance, so at least we need to put it on the table as part of the conversation.”
Sarah Gonzalez reported yesterday at Agri-Pulse that, “[In a conference call with reporters] Vilsack also commented on the crop insurance cuts suggested in the White House budget proposal for fiscal year 2016. The Obama administration wants to take $16 billion out of crop insurance over the next decade.
“Because lower commodity prices will likely trigger higher-than-expected farm program payouts, Vilsack said the administration is targeting crop insurance to make up for the potential higher payouts. ‘We’re attempting to strike that balance,’ he said.”
Additional information from USDA regarding the implementation of the Farm Bill is available at the following links: USDA’s Farm Bill Implementation by the Numbers Factsheet, Progress on 2014 Farm Bill Implementation, and Farm Bill- A Look One Year In.
An update yesterday from the Agricultural Retailers Association (ARA) indicated that, “Sen. Pat Roberts (R-Kan.) addressed the ARA Board of Directors and members Wednesday promising to be a champion for farmers, small businesses and rural communities… Roberts also addressed the budget and crop insurance, which is the Obama administration has targeted for cuts.
- “‘We will do a budget,’ he said. But ‘we are not going to mess with crop insurance if I have anything to do with it.‘”
On the House side, the Ag Committee is set to a hold a hearing on Wednesday (February 11), “To review the state of the rural economy.”
- In a column this week at The Hill Online, House Ag Committee Chairman Mike Conaway (R., Tex.) stated that, “We have made some tough decisions, such as reforming our cotton policy. It is now time for countries, like China, to take similar steps away from unsustainable, trade-distorting policies [for additional perspective on this issue click here and here]… There is an important distinction that must be made between trade-distorting agricultural policies and a safety net for farmers. Some want to use these negotiations to force the United States to unilaterally eliminate or severely damage America’s safety net for our farmers and ranchers.
- “I have and will continue to strongly urge [U.S. Trade Rep. Michael Froman] and his fellow negotiators to push back against efforts to simply eliminate our safety net for farmers and ranchers.”
Meanwhile, an update yesterday from the American Sugar Alliance (ASA) stated that, “The [ASA] today sent all new Members of Congress a letter detailing the need for a strong sugar policy, the successful track record of the existing policy, and the importance of rejecting unilateral disarmament.”
In other developments, Michael Moss reported in today’s New York Times that, “Farm animals used in federal experiments to help the meat industry would receive new protections against mistreatment and neglect under legislation introduced on Thursday by a bipartisan group of lawmakers from both houses of Congress.
“The bill aims to extend the federal Animal Welfare Act to shield cows, pigs, sheep and other animals used for agricultural research at federal facilities, including the U.S. Meat Animal Research Center in Clay Center, Neb., a unit of the Department of Agriculture. The act, which became law in 1966, excluded those animals, focusing largely on cats and dogs used in laboratory research.”
A news release yesterday from Sen. Tammy Baldwin (D., Wis.) stated that, “[Sen. Baldwin] has joined a bipartisan effort in the United States Senate, led by Senators Ben Cardin (D-MD) and Susan Collins (R-ME), to reintroduce S. 375, The Small Brewer Reinvestment and Expanding Workforce Act or Small BREW Act that will stimulate regional economies nationwide with a reduction in the excise tax on each barrel of beer brewed by small brewers. The bill also changes the threshold definition of a small brewer to better reflect modern production.”
- On a separate issue regarding tax issues that could impact farmers, at a Senate Finance Committee hearing yesterday with Treasury Sec. Jack Lew, Sen. John Thune (R., S.D.) raised concerns about a provision in the President’s budget proposal “to add a second death tax on family farms and businesses.”
Regulations – Monsanto and the Monarch
- Lydia Wheeler reported yesterday at The Hill Online that, “Agriculture giant Monsanto’s signature herbicide has nearly eradicated the monarch butterfly, according to a Center for Food Safety study.
- “The study, released Thursday, found Monsanto’s herbicide glyphosate that is being sprayed on genetically engineered, herbicide-resistant corn and soybeans — known as Roundup Ready crops — are killing the monarch butterfly’s habitat and milkweed, the monarch caterpillar’s main food source.”
The Hill article noted that, “In a blog on its website, Monsanto said agricultural innovation has helped farmers grow crops more sustainably, but effectively controlling weeds in their fields does not prevent farmers from finding alternative places for monarchs to thrive.
“‘We are collaborating with experts from universities, nonprofits, and government agencies to help the monarch by restoring their habitat in Crop Reserve Program land, on-farm buffer strips, roadsides, utility rights-of way and government-owned land,’ the company wrote.
“On the heels of the report, the U.S. Fish and Wildlife Service said it would announce a new cooperative agreement and a new national fund to protect the monarch butterfly next week.”
AP writers Matthew Perrone and Mary Clare Jalonick reported yesterday that, “From food safety to tobacco regulation and politically charged drug approvals, Margaret Hamburg reset the course of the embattled Food and Drug Administration.
“After nearly six years as FDA commissioner, Hamburg announced her resignation Thursday in an email to staff. She said the agency’s chief scientist, Stephen Ostroff, will serve as acting head of FDA.”
- Reuters writer Isla Binnie reported yesterday that, “World food prices are unlikely to rise much from their four-year slump as long as high production, low oil prices and limited import demand continue, a senior economist for the United Nations food agency said on Thursday.
“The United Nations Food and Agriculture Organisation’s (FAO) global food price index fell in January, continuing an almost uninterrupted decline since last April.”
- DTN Ag Policy Editor Chris Clayton reported yesterday that, “After years of steadily declining cattle numbers, cattlemen began looking a little more aggressively at herd rebuilding in 2014 and that appears likely to continue, at least in the short term.
“Beef is certainly behind the curve compared to pork and poultry when it comes to raising more animals to meet higher meat demand. Beef production in 2015 is projected to be down 1% in the U.S. while pork is expected to grow 2.4% and poultry could be up 3.7%, according to a forecast by the industry analysis group CattleFax provided at the Cattle Industry Convention on Thursday.
“While optimism is higher for cattlemen, there’s a little angst that the growing spread in retail prices between beef and competing proteins could hurt beef demand. That isn’t necessarily playing out at the moment, but the lack of beef on the market has translated into a windfall in prices throughout the cattle industry. The CattleFax price outlook for 2015 predicts steer prices could be up 6%-6.6%, depending on weight, and fed cattle prices could be up 1.9% for the year.”
In a front page article in today’s Wall Street Journal, Ana Campoy and Nathan Koppel reported that, “Brisket’s sudden popularity is driving prices to record highs, upsetting some barbecue traditionalists who say the runaway demand for the humble cut of beef is getting out of hand.”
Daniel Enoch reported yesterday at Agri-Pulse that, “House Ways and Means Chairman Paul Ryan says the U.S. should complete a Trans-Pacific Partnership — a trade agreement with Pacific Rim nations -without the participation of countries who think U.S. standards in the negotiations are too high.
“In a speech to the Washington International Trade Association – billed as Ryan’s first public address on trade – Ryan made it clear that he was referring to Japan and Canada, which have rejected demands that they lower tariffs on agricultural goods, which in Japan’s case reach as high as 700 percent. He said Canada’s duties on poultry, eggs and dairy products are also too high.”
The Agri-Pulse article added that, “‘Those have to go,’ said Ryan, a Republican from the big dairy state of Wisconsin. ‘And if any of the 12 countries currently in the talks think our standards are too high, well, I’d complete the agreement without them and invite them to join it later.’
“Ryan also said he supports the treaty currently being negotiated with the European Union – the Trans-Atlantic Trade and Investment Partnership, or T-TIP. But he said Europe must agree to eliminate all tariffs – ‘every one of them, just as they promised at the outset,’ and agree to science-based regulations governing imports of U.S. agricultural products.”
In an update yesterday, the U.S. Dairy Export Council and National Milk Producers Federation applauded Chairman Ryan’s remarks on trade.
And a large number of food and agricultural organizations sent a letter to lawmakers yesterday, which stated that, “The undersigned organizations strongly support the introduction and enactment of Trade Promotion Authority legislation as quickly as possible. The people we represent – American farmers, ranchers, food and agriculture companies, retailers and their workers – are heavily dependent on trade for their livelihoods. Their ability to compete in global markets is tied to the ability of the United States to eliminate impediments to international trade.”
William Mauldin reported yesterday at the Washington Wire blog (Wall Street Journal) that, “Most Republicans back the emerging trade agreement–known as the Trans-Pacific Partnership, or TPP–as well as fast-track authority. Democrats? Not so much. Many Democrats are wary of lifting trading barriers due to possible job losses, and some business leaders have criticized Mr. Obama and his economic team for appearing hesitant to tout the potential benefits of the TPP.
“Business groups worry that newer Republican lawmakers, especially conservatives and those with tea-party leanings in the House, won’t vote for legislation that affirms Mr. Obama’s ability to conclude an overseas deal while limiting procedural delays and amendments in Congress.
“So part of [Rep. Paul Ryan’s] job is shoring up support among House Republicans, a job he’s familiar with as the former chairman of the Budget Committee, by allaying lawmakers’ suspicions of Mr. Obama and buttressing the party’s pro-business credentials at the expense of some members’ isolationism.”
Victoria Guida reported yesterday at Politico that, “President Barack Obama is stepping up his effort to push his trade agenda within his party, reaching out personally to House freshmen who have expressed opposition and calling the chamber’s Democratic trade leaders to the White House for some face time.
“The president invited Democrats from the powerful House Ways and Means Committee to the White House on Wednesday so they could air their trade-related worries just days after he made the case for new trade deals in a letter to freshman Democratic Rep. Ruben Gallego of Arizona.”
And on a separate trade issue, Erica E. Phillips reported this week at The Wall Street Journal Online that, “The chief executive of the Pacific Maritime Association, a group representing port employers on the West Coast, said Wednesday that port operations could grind to a halt in as little as five to 10 days if agreement on a new labor contract isn’t reached.”
Kristina Peterson and Siobhan Hughes reported in today’s Wall Street Journal that, “Congressional Republicans, who set up a fight over President Barack Obama ‘s immigration policy this month, said Thursday their options for winning are dwindling.
“Republicans locked in a partisan stalemate with Democrats over Mr. Obama’s executive action on immigration also face internal tensions over how much they can expect to accomplish with their slim Senate majority.
“GOP leaders opted late last year to split off funding for the Homeland Security Department when they funded the rest of the government through September. They hoped to use a Feb. 27 funding deadline for the agency to block the president’s move to shield millions of illegal immigrants from deportation.”