Ag Policy Update–10 Apr 03       

 

1.      More activity on disaster assistance.  Give us an update.  

–We noted that signup for the Livestock Compensation Program (LCP) began last week.

–Producers will need to decide whether to request aid for 2001 or 2002.

–Assistance is based on number of head of livestock.

–All OK counties are now eligible.

   

 

2.      And a new program signup was just announced?  

–That’s right. 

–The signup for Crop Disaster Assistance will begin 6 Jun.

–Again, producers will need to decide on losses in 2001 or 2002.

–The covered quantity loss is for losses greater than 35% of the normal yield.

–Disaster payments plus crop insurance indemnities plus actual crop value cannot exceed 95% of the crop value if no loss had occurred.

 

3.      What about other disaster aid programs?  

–The signup for the Livestock Assistance Program (LAP) will begin in July, date to be announced.

–This program will be based on loss of feed through grazing for livestock because of the drought.

–After signup, determinations will be made to see whether LAP or LCP will provide the most benefits to the participant.  

–In addition to that, USDA just announced this week that surplus stocks of nonfat dry milk will be provided to livestock producers in the most affected drought areas.

–The stocks come from sources not intended for human consumption.

–However, OK is currently not on the list of recipient states.

 

 

4.      You’ve talked before about how there are always trade-offs when economic decisions are made.  Discuss what this means for the disaster aid program.  

–Ok, the viewers may recall that the President in his approval of the 2002 farm bill said that the justification for the large price tag was that producers should no longer need special, unplanned (ad hoc) aid from future budgets.

–So, when some interest groups and some in Congress sought aid for the drought, the President said that he would not approve new money.

–Instead, President Bush said funds would have to be transferred from one account to another.

–What Congress did in response was to defund the new Conservation Security Program $3.2 billion.

–So, while it sounds good and may really be needed to come up with money for disaster aid, it did take away funds from countless farmers who might have benefitted from the new CSP.

–Only the future and the desires of taxpayers will tell if these are the best decisions.

 

5.      One of the other issues that often arises is whether it is even appropriate for the government to bail out producers when they have access to crop insurance.  What do you make of that?  

–The argument goes like this: If Congress continues to bail out producers affected by drought and other weather-related disaster, why should producers bother to participate in crop insurance?  It is as if the government is creating a disincentive to crop insurance participation.

–So, should the government say “go to crop insurance or you’re out of luck”? Or, should they say “we’ll be there for you, no matter what?”

–What analysis shows in the current situation is that producers are better off in most cases if they participated in crop insurance.

–The margins are close, and still subject to debate.

–Senator Lugar tried to get the debate focused on this before the 2002 farm bill but failed.

–It may yet be a subject of discussion in the future.

 

 

6.      Speaking of conservation programs, what’s the latest on the Conservation Reserve Program?  

–We thought that signup would definitely be this June.

–As a matter of fact, no dates have been announced.

–Training of FSA staff is taking place in anticipation of a new general signup 26.

–There are some changes we can discuss in the weeks to come, including:

–increased acreage cap

–cropping history will be required

–managed haying & grazing will be allowed

–a new Farmable Wetlands Program (FWP)

–cost-share for performance of contract management activities

–marginal pastureland criteria

–FSA will have a new automated process with new software that should make things easier for both FSA staff and participants.

 

 

7.      We’ve avoided talking about the war.  The military action seems to be moving to a successful point.  What about funding from Congress?  

–As the viewers may recall the spending bills have not included funding the war effort.

–The House and Senate have passed similar supplemental spending bills that include funding for a month of military action, pay-offs to coalition members, homeland security, and extraneous amendments.

–Conferees were to have agreed on a compromise earlier this week, but there are still differences.

–This should be wrapped up within the next few days.  

–As we’ve noted before, the growth of the federal budget deficit is having an impact on what may need to be cut from farm programs in the 2002 farm bill.

–If more of the President’s tax cuts are approved, it is more likely that cuts will be made to mandatory commodity and other program spending.

–As we noted earlier, it is all a matter of trade-offs.

–The question for viewers to ask and answer is who are the winners and losers in such trade-offs.

 

 

8.      Let’s shift to the economic situation.  Is it time to start bringing up the “r” word?  

–Recession?

–We’ve talked in recent weeks about the possibility of a double-dip recession.

–We seem to be on the edge of tumbling into recession or climbing out of the nosedive we’ve been in.

–How securing the peace goes, how consumers and manufacturers respond to or anticipate this situation will tell us which the economy goes.

–The IMF is concerned about the duration the war and securing the peace because they see that as the critical element in whether there will be a recession.

–The Stock Market doesn’t seem to be voting on a short term optimistic outcome.

–There will be some week-to-week roller coaster responses by the public to the recent successes of the military action, but that will be tempered with the concerns about securing the peace and the adverse reaction in Arab countries about the entire war effort.

 

 

9.      There was some news about the trade deficit this week.

–That’s right.  The trade deficit narrowed for February to $40.3 billion, but that’s still relatively high.

–US consumers bought less, and exports were up.

–We’re not likely to see any real progress soon.

 

10.    Other policy-related news:  

a.      GAO released a report indicating USDA & FDA need more authority and training on food security.

A key concern is with the security of processing facilities.

Voluntary guidelines have been issued, but implementation is uncertain.  

b.      NRCS is requesting proposals for Farmland Protection Program.

FPP is designed to help owners and producers keep land in agriculture.

Tribes, states, local governments, and NGOs may submit proposals on cooperating to acquire conservation easements.

Deadline is 19 May.

 

 

11.   Congress:

a.     Recent activity:

–Congress continues work on the FY04 budget  

b.     Current/upcoming:

–House Ag Committee subcommittee conducts hearing on farm bill implementation and disaster aid (10 Apr)

–Senate Ag Committee subcommittee will conduct a field hearing on COOL in Joplin, MO (22 Apr)  

c.     2003 schedule:

–to be announced  

d.     Key issues not completed

–work on the fy04 budget

–Healthcare reform

–Prescription drug benefits

–Merger activities, especially in agriculture

–Response to economic slump

–Comprehensive energy legislation (& status of renewable fuel standards)

–Restoration of full CSP funding

    

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