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Ag Economy- Trade; Budget; Tax Extenders; Policy Issues; and, CFTC
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Agricultural Economy- Trade Issues

Yesterday, the Federal Reserve Board released its Summary of Commentary on Current Economic Conditions. Commonly referred to as the “Beige Book,” the report included several observations with respect to the U.S. agricultural economy.

The Fifth District (Richmond) noted that, “Some growers planned fewer equipment purchases relative to a year ago;” while the Tenth District (Kansas City) indicated that, “Farm income expectations fell sharply since the last survey period as above- average corn and soybean yields were not expected to fully offset low crop prices. District contacts reported current levels of farm income that were significantly lower than last year despite some support from crop insurance and strong profits in the livestock sector. Although reduced income for crop producers had contributed to a rise in the need for short-term loans to the farm sector, agricultural bankers reported that sufficient funds were available for qualified borrowers. Following several years of very strong growth, District cropland values declined slightly in recent months and were holding just above year-ago levels.”

And the Ninth District (Minneapolis) pointed out that, “Farm incomes continued to be affected by lower crop prices; in contrast, livestock and dairy producers benefited from lower feed costs and high output prices.”

Meanwhile, Reuters news reported yesterday that, “U.S. President Barack Obama on Wednesday committed to urge lawmakers to back a bill giving trade deals a fast track through Congress, an effort some think could break a logjam on the issue and help secure major agreements under negotiation.

“Speaking to business leaders, he acknowledged differences within his own Democratic Party on free trade agreements that he supports and said he would also make the case to unions that trade brought benefits for workers.”

The article noted that, “Trade experts said personal intervention by the president would boost support for trade promotion authority, or TPA, in Congress, where there is opposition from some Republicans as well as Democrats.”

David Nakamura reported in today’s Washington Post that, “Speaking at a gathering of business leaders, Obama offered his strongest public defense of his administration’s pursuit of a major 12-nation trade deal in the Asia Pacific, known as the Trans-Pacific Partnership (TPP), that has been opposed by Democrats, labor unions and environmental groups.

“The administration has argued that the trade deals will boost U.S. exports and lower tariffs for American goods in the fast-growing Asia-Pacific region, where the United States has faced increasing economic competition from China.”

Earlier this week, USDA released its Outlook for U.S. Agricultural Trade: December 2014, which stated that, “Fiscal 2015 agricultural exports are forecast at $143.5 billion, $9.0 billion below fiscal 2014 and down $1.0 billion from the August forecast for fiscal 2015.”

The report noted that, “U.S. agricultural imports are forecast at a record $116.0 billion, down $1.0 billion from August, but $6.8 billion higher than in fiscal 2014.

“The U.S. agricultural trade surplus is forecast at $27.5 billion, down from $43.3 billion in fiscal 2014, and the smallest surplus since fiscal 2009.”

 

Budget- Immigration

Jeremy W. Peters and Ashley Parker reported in today’s New York Times that, “House Republican leaders appeared ready to buck their Tea Party flank on Wednesday as they closed in on a spending deal to avert a government shutdown and prepared to call a vote next week.

“If the plan by Speaker John A. Boehner and his leadership team prevails, it will be a significant victory for Republicans eager to avoid the kind of bitter and politically harmful fight that led to a 16-day shutdown last year.”

The Times article explained that, “Republican leaders have put forward a two-step plan that would first allow their members to vote as soon as Thursday to disapprove of Mr. Obama’s executive action on immigration.

Then they would approve a hybrid bill next week, when the government’s spending authority is set to expire. It would fund the bulk of the federal bureaucracy through the end of the current fiscal year next Sept. 30. But the Department of Homeland Security, which is responsible for carrying out the president’s action, would receive money only until early next year, when what will then be a Republican-controlled Congress would revisit the matter.”

Today’s article added that, “Mr. Boehner’s bet that he can get enough Democratic votes to pass the Republican proposal carries risks. Though the White House has signaled to House Republicans that the president is open to signing the legislation and Harry Reid of Nevada, the Senate majority leader, has said he expects it to pass, House Democrats are still negotiating some details of the final spending plan.”

Meanwhile, an update today at Agri-Pulse Online by Spencer Chase indicated that, “Agriculture Secretary Tom Vilsack says President Barack Obama’s executive action on immigration will provide some help to the agriculture industry, but he says Congressional action is needed to make sure U.S. farmers have the legal workforce they need.

“Speaking Wednesday at a Washington Post forum on Feeding the Future, Vilsack called the lack of Congressional action on immigration reform ‘unbelievable.’ He said Obama’s announced action could help protect 250,000-400,000 undocumented farm workers from deportation, ‘but it still isn’t what is necessary.’

“‘Congress needs to act,’ Vilsack said. ‘If we’re to maximize the ability of the U.S. to produce food, we’re going to have to have immigration reform.’”

 

Tax Extenders

John D. McKinnon reported in today’s Wall Street Journal that, “The House on Wednesday approved a bill extending a raft of temporary tax breaks, but only through the rest of this year, reflecting lawmakers’ struggles over tax policy even on short-term measures. The vote was 378 to 46.

“Almost no one in Congress advocates the patchwork approach, but lawmakers and the Obama administration have been unable to agree on any longer-term solution, given partisan divides. And the frequently expiring temporary breaks have led to repeated, growing clashes.”

Rep. Randy Neugebauer (R., Tex.) noted yesterday that, “Today I joined my colleagues in the House to support the extension of many important tax provisions that benefit individuals, small businesses, and the overall health of the economy. The extension of Section 179 and bonus depreciation are especially important to hardworking farmers, ranchers, and small business owners in the 19th District of Texas.”

Bernie Becker reported yesterday at The Hill Online that, “Senate Finance Chairman Ron Wyden (D-Ore.) has all but acknowledged that the House’s one-year extension of expired tax breaks would become law, a spokeswoman said Wednesday.

“Wyden and other Democrats on his panel had been seeking a two-year extension of dozens of tax breaks that expired at the end of 2013.”

American Soybean Association (ASA) President and Iowa farmer Ray Gaesser indicated in part yesterday that, “ASA first and foremost supports a long-term extension of several of the items included in today’s short-term fix. These initiatives include the dollar-per-gallon biodiesel tax credit, expensing for farm equipment and infrastructure under the Section 179 expensing provision, and bonus depreciation on farm assets. Such an approach provides greater certainty and a more stable climate for the farmers and producers who make use of these programs, and we were very disappointed that agreement was not reached on a broader measure. That said, we support the House’s passage of their short-term extension in the absence of a more permanent solution.”

Bob Stallman, President of the American Farm Bureau Federation noted in part yesterday that, “Small business provisions like Section 179 and bonus depreciation increase cash flow, and that lets farmers and ranchers put their money back to work immediately so they can care for their land and animals.

“Provisions that encourage the production and use of clean, renewable energy are especially important. Farmers and ranchers depend on affordable energy and recognize the importance of fuel and power tax incentives to boost its production and promote innovation.”

 

Policy Issues

Todd Neeley reported yesterday at DTN (link requires subscription) that, “Farmers are being called on to play an expanded role in improving water quality after an algae bloom affected Toledo, Ohio, drinking water last summer. However, there is concern that putting more U.S. waters under federal control via the Clean Water Act could weaken farmer interest in conservation programs.

“While rural America waits for EPA to finalize the controversial waters of the U.S. rule that drew more than one million public comments prior to the Nov. 15 deadline, members of the Senate Committee on Agriculture, Nutrition and Forestry Wednesday pressed the head of the Natural Resources Conservation Service to stand up for farmers’ interests when it comes to the rule — in particular the interpretive rule.

“At this intersection is where the proposed rule and the growing national call to reduce phosphorus and other nutrient runoff that contribute to algae blooms come into conflict. Farmers may be less inclined to undertake conservation measures for fear they may violate the Clean Water Act rule if they fail to meet NRCS specifications.”

Mr. Neeley noted that, “NRCS Chief Jason Weller said the original intent of the interpretive rule that exempts 56 NRCS conservation practices from the CWA was to identify specific practices for producers in order to provide certainty. However, Weller told the committee federal officials still are leaving open the possibility of pulling the interpretive rule because of the outcry and confusion it has caused.

“‘Farmers say all we hear is more government regulation. Those actors have lost the confidence of the ag community. Many Hoosier farmers have said they are unaware whether NRCS practices can trigger the Clean Water Act,’ said Sen. Joe Donnelly, D-Ind.”

The DTN article added that, “Sen. John Boozman, R-Ark., said he believes the waters of the U.S. rule will be detrimental to NRCS programs. ‘My concern is that when you do something like waters of the U.S., what is that going to do to voluntary programs?’ he said.”

A news release yesterday from the Senate Ag Committee noted in part that, “[Chairwoman Debbie Stabenow (D., Mich.)] today said that farmers and ranchers need to take advantage of public-private partnerships and programs meant to improve water quality in our lakes, rivers, and streams. Stabenow said the agriculture industry has already become a part of the solution when it comes to solving the crisis surrounding water quality. Farmers and ranchers have the ability to take steps to improve their management practices through voluntary conservation programs that were significantly bolstered in the 2014 Farm Bill.”

An update yesterday from Sen. Pat Roberts (R., Kans.), which included a video replay of some of his remarks at yesterday’s hearing, indicated that, “Senator Roberts questions USDA’s Natural Resource Conservation Service Chief Jason Weller about the Lesser Prairie Chicken and WOTUS rules at a Senate Agriculture Committee hearing on Water and Voluntary Conservation.

Chief Weller committed to providing Congress with a report of the effectiveness of USDA’s conservation programs for the lesser prairie chicken.”

An update yesterday from Sen. John Thune, which also included a video replay of a portion of his questions at yesterday’s hearing, noted that, “At a hearing today before the Senate Agriculture Committee, [Sen. Thune]questioned the Chief of the U.S. Department of Agriculture’s (USDA) Natural Resources Conservation Service (NRCS) Jason Weller about the progress clearing the backlog of undetermined wetlands in South Dakota. Thune also reminded the NRCS Chief of USDA’s responsibility to protect farmers from the potentially harmful Environmental Protection Agency proposed ‘waters of the U.S.’ rule.”

And a YouTube update yesterday from Sen. Michael Bennet (D., Colo.) (“Bennet Presses NRCS on Efficient Implementation of the Farm Bill Conservation Programs”) contained a replay of his remarks to Chief Weller at yesterday’s hearing.

Meanwhile, AP writer Hope Yen reported yesterday that, “The mayor of Toledo, Ohio, called Wednesday for the federal government to devote full attention to improving water quality in America’s lakes and rivers, describing the toxic algae blooms that tainted his city’s water supply this summer as a danger ‘doomed to be repeated.’

“Mayor Michael Collins appeared before the Senate Agriculture Committee for the first time after microcystin toxins in Lake Erie fouled the tap water for 400,000 people in Ohio and Michigan for two days in August.”

The AP article noted that, “Sen. Sherrod Brown, D-Ohio, urged Agriculture Department officials to give Ohio access to $13 million in federal grant money to implement conservation partnerships. That application is currently under consideration. ‘Ohio’s Western Lake Erie Basin is a critical source of our state’s drinking water and the lifeblood of our agricultural industry,’ he said.

“Sen. Debbie Stabenow, D-Mich., who chairs the committee, called the Toledo water problems a ‘stark wake-up call’ to the nation’s crisis on water quality.”

Also yesterday, Donnelle Eller reported at The Des Moines Register Online that, “The first year that prairie strips were strategically planted in corn and soybean fields near the Neal Smith National Wildlife Refuge, they worked to reduce loss of nutrients that can impair water quality, says Matt Helmers, an agricultural and biosystems engineer at Iowa State University.

“‘Things like plant diversity — the diversity of the prairie — have changed over time, evolved and enhanced,’ Helmers said. ‘But water quality, we saw real benefits right from the beginning. It was surprising. We weren’t sure we’d see dramatic benefits.’

“Those dramatic benefits Helmers and other researchers discovered: Converting just 10 percent of a crop field into prairie could reduce by 95 percent the soil and sediment leaving the field. Phosphorus loss decreased by 90 percent, and nitrogen loss by 85 percent. And the prairie created a habitat for pollinators, birds and animals.”

In other developments, Lydia Wheeler reported at The Hill Online that, “The U.S. Fish and Wildlife Service released its annual lists of plants and animals that are candidates for protection under the Endangered Species Act.

“The mao or ma ‘oma ‘o bird, an olive green honeyeater native to Samoa, 18 flowering plants and four ferns found on the Hawaiian Islands were among 23 new entries this year.”

And a news release yesterday from House Majority Leader Kevin McCarthy (R., Calif.) indicated that H.R. 5781, the California Emergency Drought Relief Act, will be scheduled for a vote on the House floor next week.

In part, Leader McCarthy noted that, “California is facing the worst drought in a century, which has led to barren farms and drastic water shortages in our communities. We have reached this point after years of inaction by Senate Democrats while ill-conceived policies have continued to prioritize the well-being of fish above people. Though only Mother Nature can dictate the duration of the drought, the situation demands immediate action to address government-created barriers to ensure available water flows throughout our state and not washed out to the ocean.”

Rep. Jim Costa (D., Calif.) indicated this week that, “This bipartisan legislation [H.R. 5781] offers a common-sense solution to a long-term problem. The Valley has suffered far too long because of our broken water system. This bill will allow us to take advantage of increased flows through the delta and provide much-needed water to our Valley’s families and farms. California’s water needs must be addressed, and this legislation provides us with one more tool to bring relief to the San Joaquin Valley.”

A news release yesterday from Rep. John Garamendi (D., Calif.) noted that, “Today, Northern California Representatives Jared Huffman (D-02), George Miller (D-11) Mike Thompson (D-05), Doris Matsui (D-06), Jerry McNerney (D-09), [Garamendi], and Ami Bera (D-07) released the following statement regarding the House Republican water bill introduced last night:

“With just a few days left in the legislative session, the House plans to pass yet another divisive, dishonest, and potentially devastating California water bill without any public input or legislative oversight. This is unconscionable, and just the latest chapter in their reckless approach to micromanaging the state’s water during one of the worst droughts in our history.”

 

CFTC- Commodity Futures Trading Commission

Tim Devaney reported yesterday at The Hill Online that, “The Commodity Futures Trading Commission (CFTC) is delaying new hedging rules for agricultural commodity traders.

“Commodity traders are facing new speculative position limits for 28 agricultural commodity futures and options contracts that previously had been exempt from the rules.”

Keith Good