21 Feb 01 
(Sunup Program to be aired 22 Feb)

1.     We’ll continue our look at recent farm bill recommendations today.  Tell us about the House Ag Committee hearings. 

–The House Ag Committee last week heard from economists and farm groups on the status of the farm economy and prospects for the future.

–A 4th year of low commodity prices were predicted.

–USDA Chief Economist indicated that 2001 net cash income will be at it lowest since 1994, perhaps even $4 billion below the average of the 1990s.

–Other economists were also negative.

–A discussion between Minority Chair Stenholm and a noted economist focused on how dependent producers have become on government aid.

–Recent data released by USDA on the wheat program, for example shows that per bushel payments have risen from 87 cents in 1996 to 1.28 in 1999 and 1.23 in 2000.

–The intent of the 1996 Freedom to Farm Act was to get wheat payments down to 59 cents in 2000 and down to 46 cents by 2002.  Some suggest we’re going in the wrong direction.

2.        There were some commodity groups represented in the hearings, starting with the National Cotton Council.  What did they propose?

 –That’s right.  There will be several hearings in the next several weeks to allow various commodity and farm groups to summarize their proposals for the next farm bill.

–This past week, spokesmen for the Cotton Council called for full-production programs with a reasonable level of support for producers.

–Recommendations for upland cotton included

–continuing a marketing loan

–continuing the 3-step program

–maintain flexibility

–eliminate payments limits.

3.     Ok, let’s return to the farm bill recommendations from the Commission on 21st Century Agriculture last month.  Remind us how the debate was initiated within the past few weeks.

 

–Recall that the 1996 farm act called for a Commission on 21st Century Agriculture to evaluate the status of agriculture and begin to make recommendations to Congress and the Administration.

–Barry Flinchbaugh, chair of the Commission, presented the report to the Senate and House Ag Committees last week.

–The Commission was composed of a broad-based representation from farm states.

–The report was based on testimony gathered in hearings around the country, public comments and analysis of data from USDA and universities.

–The Commission’s recommendations covered 6 areas: income safety net, risk management, environment, trade, special commodity policies, and small farms.

4.        Today, let’s look at the Commission’s recommendations with respect to conservation and the environment.

1.     Continue the CRP, with increased acreage going to buffer strips, filter strips, wetlands, grass waterways & partial field enrollments.

2.     Continue the EQIP.

3.     Research to

–provide voluntary incentive-based programs for ag’s contributions to air/water quality

–provide compensation to producers w/environmental practices

–consider benefits of carbon sequestration, control greenhouse emissions, manure management & alternative fuels. 

5.     Not a lot of detail, but what can you tell us about the likely impacts of these proposals?

–Here we get a clue about how programs can have multiple goals.

–While CRP and EQIP are primarily intended to be environmental programs, they have also been important for other reasons.  Notably, the CRP has also served as a supply control program.  CRP & EQIP also serve as ways to supplement farm income.

–Some are proposing a shift away from commodity programs and toward environmental programs, making so-called “green payments” substitute for commodity payments.

–The research proposals suggest some interest in enhancing the “green payment” concept.

–There are proposals in the OK Legislature to support such practices as carbon sequestration, so there is some grass roots support for moves in this direction.

6.     More news on the economy was released this week.  What’s the message for agriculture?

–A recent report by the Commerce Department shows a dramatic drop in business investment in new equipment during 2000.

–Corporate spending on equipment was growing at 21% in the first quarter of the year.

–By the final quarter, this rate had dropped to 5%. 

–The slim good news is the rate is still positive.

–The bad news is how much it dropped and what this suggests for big business expectations.

–Cuts in employment by some businesses emphasize this apparent loss of confidence in the growing economy by big business, making the fears of arrested-growth trends almost a self-fulfilling prophecy.

–For producers who rely on off-farm income, there could be layoffs.

7.     We noted last week that the Fed is likely to further cut interest rates and that’s going to reduce the cost of credit for producers.  Any other economic news for producers?

–The Fed’s anticipated interest rate cuts may be up in the air, since January consumer prices jumped twice as much as forecasted.

–On energy prices, The University of Kentucky reviewed data on escalating nitrogen fertilizer prices, which are closely related to natural gas prices.

–Natural gas prices have grown 3-4 times in the past year, and nitrogen fertilizer prices have doubled.

–Given that producers have cut back on use, fertilizer producers are operating at 54% capacity, compared to the 10-year average of 95% capacity.  This may drive prices up even higher.

–Expect some legislative proposals for relief to producers on this point alone.

–Producers need to re-evaluate their fertilizer usage, and may want to work with a county extension educator on the potential for net benefits of continued fertilizer usage.

–GAO announced it will be reviewing natural gas price impacts on fertilizer.

8.        Other programs/policy-related news:

a.     USDA announced $500 million in oilseed payments to producers in 2000 of soybeans, sunflowers, flaxseed, canola, rapeseed, safflower seed, mustard, crambe, sesame.  Payment rates are 1.8% higher than the projected rates.  About 3500 OK producers are expected to receive over $1.8 million.

b.     USDA Ag Outlook Forum begins today (22 Feb) in Virginia.  Farm policy prospects, outlook for trade, prices, income, environment and food safety will be covered.  Presentations may be available on the USDA website.

c.     USDA announced the national average price support level for 2001 quota peanuts at $610/short ton (no change).  For additional peanuts, the level will be $132/short ton (no change).

 d.     The UN this week released a report indicating global warming is worse than previously thought.  Temperatures could rise as much as 10 degrees by 2100, the most rapid change in 10,000 years.  This report further the challenges the US to return to the negotiating table on the Kyoto Accords to reduce global warming.

 e.     Senators Grassley & Baucus reintroduced several farm tax relief provisions, including the FFARRM accounts that allow producers to shelter income in good years and draw it out in lean years, reducing the tax burden. 

f.      Senator Lugar & Representative Boehner also reintroduced measures to aid producers, including a similar tax relief measure FARRM, a re-evaluation of EPA regulations, and fast track authority for the President.

g.     Several senators have introduced proposals to block IRS imposition of self-employment txes on some CRP payments.

9.     107th Congress:

a.        Recent/Current:

–House Ag Committee business meeting (committee organization)& reviewed current state of the farm economy and the economic impact of federal policy on agriculture (14 Feb)

–House Ag Committee reviewed the future of farm programs (15 Feb)

b.        Upcoming:

–Senate Ag Committee hearing to review matters related to Farm Credit Administration, especially proposed regulation on national charters (26 Feb)

–House Ag Committee reviews federal farm commodity programs w/American Farm Bureau (28 Feb)

  c.        Congressional Calendar:

--As of 27 Feb, about 108 weekdays remain in this Congressional session. 

 

                    February 16 - 26             Presidents Day District Work Period

                   April 1                              Daylight Savings Time Begins

                   April 7 - April 23            Spring District Work Period

                   April 8                              Passover

                   April 15                            Easter

                   May 13                            Mother’s Day

                   May 25 - June 4              Memorial Day District Work Period

                   May 28                            Memorial Day

                   June 14                    Flag Day

                   June 17                    Father’s Day

         June 30 - July 8               Independence Day District Work Period

         July 4                               Independence Day

         August 4 - Sep 4               Summer District Work Period

         September 3            Labor Day

         September 18          Rosh Hashanah

         September 27          Yom Kippur

         October 5                 Target Adjournment

 d.     Key issues for this session of 107th Congress include:

--dealing w/Social Security, Medicare, Medicaid.

--consideration of tax cut, debt reduction & appropriations bills

–campaign finance reform

–education reform

–moratoria on mergers in agribusiness

–farm income emergency aid

–Endangered Species Act reform

–energy policy reform

–framing the debate for the 2002 (?) farm bill

–Trade Negotiating Authority (TNA–formerly fast track authority)

 

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