What is in this article?:
- Farm bill up against clock of presidential election
- Insurance, cotton, rice, beef
- As the Senate and House agriculture committees take up the new farm bill in earnest, FAPRI delivered its latest baseline report to Congress on March 5.
- Election politics make it harder to put together packages that can gather bipartisan and bicameral support. The more time that passes — the harder it will be to get a farm bill accomplished.
For decades, Congress has relied on the Food and Agriculture Policy Research Institute (FAPRI) for solid, unbiased data to build legislation upon. That won’t change with the new farm bill and as the committees take up the new legislation in earnest, FAPRI delivered its latest baseline report to Congress on March 5.
“The ‘super committee’ process last fall had its ups and downs,” says Pat Westhoff, co-director of the University of Missouri-based FAPRI. “One upside was it got a lot of people talking to each other who otherwise might not have been talking prior to the heat of the farm bill debate.
“So, there have been a lot of attempts to put things together that would be satisfactory to a variety of groups.
“Of course, there is a tough row to hoe getting a farm bill done in an election year. It’s hard to step back from the politics of a presidential election and put together packages that can gather bipartisan and bicameral support. The longer they wait, the harder it will be to get a farm bill accomplished.
“I think the Senate Agriculture Committee in particular is trying to come up with a set of proposals that both Democrats and Republicans can live with. I won’t predict success or failure but will say they’re working hard.”
Westhoff, who spoke with Farm Press, also touched on the main findings of the current baseline, where FAPRI sees key crop performances over the next decade, along with food inflation and dairy and meat prices. Among his comments:
Main things that jumped out from the baseline…
“In the briefing book prepared for Congress, we deliberately made sure the very first chart shows that ‘weather matters.’ The fact that we had sub-average, back-to-back corn yields in 2010 and 2011 is largely why there have been above-average grain prices.
“If we can just go back to having more normal crops this summer, that would put pretty serious downward pressure on prices. That’s one of the reasons we’ve got a $4.81 projected corn price for the 2012/13 marketing compared to this year’s near $6.
“Of course, that’s a very simple point that folks in farm country are well aware of. But it’s something that some of the people we speak with in D.C. need to have driven home.
“Another thing to note is that the state of the general economy matters, obviously. We have relatively modest rates of income growth – a couple of percent GDP growth -- in the general economy over the next couple of years. We won’t be in recession but it isn’t the kind of growth we’d like to see.
“According to HIS Global Insight, the group we rely on for macroeconomic forecasts, it will be 2014 before we get enough economic growth to cut into unemployment in a serious way.
“What will happen with the oil price in the near term will also matter quite a bit. The report highlights just how important the market uncertainties really are – from weather, from the macro-economy and oil prices and any number of other factors.”
How did the new farm bill play into the report’s assumptions?
“That’s an important component. This is a ‘baseline projection’ and we try to avoid using the ‘F-word’ – that being ‘forecast.’ By saying forecast it implies we know what will happen in the future; we don’t.
“So this projection assumes current policies remain. That isn’t because we think that’s the most likely outcome. In fact, if you asked me to bet, I’d put my money on having less spending on farm programs in the next year or two than is in this baseline.
“But we want to have a point of reference so that when we do further analysis for Congress, we can say how much difference it will make if the law is changed in one way or another. Also, it will provide a perspective on what would have happened if current law was kept in place.
“The Senate, particularly, are trying to move on a fairly accelerated pace (towards writing a new farm bill). They’re trying to have some draft proposals together in short order.”
On ethanol and grain…
“In the near-term, we don’t expect to see much change in ethanol production in 2012 or 2013. That’s in sharp contrast to the years of rapid growth we’ve had since 2005 and the constant upward push in terms of the demand for corn and other feedstocks.
“There are several reasons for that. One is the end of the 45-cents-per-gallon tax credit. With that going away there’s less incentive for ethanol producers to make more than the mandates require.
“The second thing is high corn prices, which mean less incentive to produce more ethanol than is necessary.
“Third, we’re largely consuming all the ethanol in 10 percent blends that we can in the country. If we produced more ethanol for the domestic market we wouldn’t know what to do with it. While E-15 may happen at some point, it hasn’t yet.
“That combination of factors means we’ll level off with ethanol for the next couple of years. Once we get past the next two years, there may be a bit more growth in ethanol production because we can use up to 15 billion gallons of corn-based ethanol to satisfy the RFS (Renewable Fuel Standard) by 2015. That’s a bit more than we produce today. It will be tough to use that much unless E-15 becomes available and people are willing to buy it.”