Ag Policy Update–13 Jun 03       

 

1.    Signup for disaster assistance began 6 Jun.  What can you tell us?  

–Signup for the Crop Disaster Program (CDP) is underway.

–Producers will need to decide on coverage of losses in either 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 what the crop value would have been if no loss had occurred.

–Closing will be announced at a later date.

–Since this program has no cap, participants will not be penalized for later signup, provided they don’t miss the closing date.

   

 

2.    What can participants expect in assistance?  

–There is an $80,000 limit for each producer.

–Payments will be issued on losses above the 35% of expected production using the following formula:

(1)   50% of established price for crops covered by crop insurance;

(2)   50% of established price for crops that crop insurance wasn’t available;

(3)   45% of established price for crops that crop insurance was available but weren’t insured

 

 

3.    We discussed the new tax reform bill last week.  You indicated that a potential downside would be reductions in farm program support.   

–That’s right and, sure enough, the House Ag Committee has been notified by the House Budget Committee Chair that have 3 months to suggest ways to save $5.5 billion in cuts over the next 10 years.

–As the budget deficit is revised upward, the size of cuts is sure to go higher.

–Already, the House Appropriations Committee is allocating nearly $400 million less for fy 04's ag budget.

 

4.    The Federal Reserve Bank’s so-called “Beige Book” report was issued this week.  What’s it say about the economy?  

–Kansas City, the district that OK is in, was one of 4 of the 12 districts that detected signs of generally improving economic activity.

–The others were Dallas, New York and Minneapolis.

–The other positive sign was that no district indicated overall worse conditions since the April report.

 

 

5.    So, it’s time to relax and expect the next boom?  

–Not quite; in fact the report was very cautious, preferring to emphasize the continued sluggishness.

–Consumer spending remained “lackluster”.

–Manufacturing and Agriculture were mixed.

–Residential construction is generally up, but commercial sales and real estate markets remain weak.

–The energy market is up, and recent signs that prices are moving up will strengthen this sector.

–Labor markets continue weak, with some downward pressure on wages.

 

 

6.    You said the Oklahoma’s Kansas City District was somewhat better.  Can you elaborate?  

–Retail sales, residential real estate and energy sectors improved.

–Manufacturing was sluggish, while Agriculture was hampered by weather.

–Wage and price pressures were perhaps not as bad as in many other districts.

 

 

7.    So what do these reports say about the near term?  

–Greenspan and others in the Fed continue to signal that deflation is now their primary concern.

–With unemployment up and likely to increase, wage increases will be depressed.

–If they remain concerned, the Fed will likely again drop interest rates below the 41-yr low of 1.25% at their next meeting the last week of June.

–The nonpartisan Congressional Budget Office forecasts a record $400 billion federal deficit for fy 2003.

–The CBO indicated the tax cuts and defense spending were to blame.

–The Bush Administration is claiming that the 2004 deficit numbers will look better, but most analysts suggest they will be worse, perhaps $500 billion or worse.

 

 

8.    USDA released new estimates on the farm economy.  Good news?  

–USDA projects that net cash farm income will jump to $55.1 billion, a 25.8% increase from 2002.

–Reasons include:

–5.1% increase in cash receipts

–over 80% increase in direct government payments from 2002.

–This suggests the average farm household income will increase to $65,789 in 2003.

–I would caution viewers about averages.

–Most farm families will be significantly below the average.

 

 

9.    Other policy-related news:  

a.    USDA has added carbon sequestration as a factor in consideration of contract applications for EQIP, CRP and Forest Land Enhancement Program (FLEP).

–Practices include reduced tillage, increased crop rotation, buffer strips, reducing soil erosion, using high residue crops such as wheat and corn, cover crops, high-carborn storing plant varieties.  

b.    USDA has extended the application deadline for $23 million in renewable energy grants.

–The Renewable Energy Systems & Energy Efficiency Improvements Program is extended to 27 Jun.

–The grants are available to eligible rural small businesses, farmers, ranchers to develop renewable energy systems and make energy efficiency improvements.

–Grants may be used to pay up to 25% of project costs, using wind, solar, biomass, geothermal, hydrogen and water sources.

c.    Trade talk activities:

–US-Chile FTA signed today (6 Jun)

–Mexico & Japan FTA planned to be signed in October

–Chile is pushing for a US-Chile-Mexico FTA to restart the flagging FTAA, although Brazil is suggesting FTAA can be completed by 2005; Brazil co-chairs the talks w/US.

–US-Thailand FTA talks scheduled for end of 2004.

 

 

10.   Congress:

a.     Recent activity:

–Congress continues work on the FY04 budget

–Congress continues debate on Omnibus Energy Bill (S 14)

–House Ag subcommittee reviewed biotechnology in ag (11 Jun).

–Senate Ag Committee conducted hearing on implementation of Ag Risk Protection Act and related crop insurance issues (12 Jun).  

b.     Current/upcoming:

–CANCELLED:

–House Ag subcommittee field hearing at Statesboro, GA (14 Jun), and Logansport, IN (16 Jun) to review crop insurance and commodity programs

–House Ag subcommittee reviews biotech in ag (17 Jun)

–House Ag Committee public hearing to review trade negotiations (18 Jun)

–House Ag subcommittee reviews Commodity Futures Modernization Act (19 Jun)

–House Ag subcommittee reviews packer ownership of livestock (21 Jun)  

c.     2003 schedule:

–As of 9 Jun, 68 weekday workdays to target adjournment of 3 Oct 03. 

 

 

10.   (continued)  

d.     Key issues not completed

–work on the fy04 budget

–Healthcare reform

–Prescription drug benefits

–Merger activities, especially in agriculture

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

–Restoration of full CSP funding

 

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