The House went home early this week, while the Senate dealt with minor legislation – the media called this “bad optics” – but the direct negotiations with the White House on a fiscal cliff solution continued among the small group of chamber leaders who must sell any solution to their party conferences. And while both sides of the negotiations continued to play to crowd – loud voices and posturing for voters and the media – reports indicate quiet progress is being made to create a framework to avoid tax increases and economic turmoil come January 1, 2013. The sticking point appears to be how much of a “down payment” will be made on deficit reduction now, and from where that revenue will come. President Obama continues to demand a significant dollar figure, with most of the money coming from increased taxes on high-income earners; the GOP wants a lower number, generating revenue by tweaking the federal tax code and “reforming” some entitlement program spending. However, both sides agree the heavy lifting gets done next year. Reports indicate both sides have embraced an approach similar to deficit reduction action taken in 2010-2011 that led to the Budget Control Act, the law that carries the January 1, 2013, mandatory sequestration requirements of the fiscal cliff scenario. This includes the down payment, along with 2013 deadlines on deficit reduction through tax reform, government spending cuts and reduced appropriations moving forward. House and Senate authorizing committees would receive deadlines for making recommendations on how to re-invent, cut or eliminate program spending in areas under their control. As to tax rates, the GOP continues to say no increases, though some members are willing to talk “compromise” on that position. If Republicans accept increased taxes on any earner segment, there are two ways to get there: first, rather than a jump from the current 35-percent top federal tax rate to a full 39.6 percent as Obama wants, the GOP might accept an increase to 37 percent. And rather than hit the top 2 percent of wage earners – anyone making $200,000 a year, or $250,000 per couple – Republicans may accept putting any tax rate increase on the top 1 percent, or those making roughly $700,000 or more a year. The President’s proposal would cut $4 trillion from the deficit over the next decade, raising $1.6 trillion in new tax revenues by hiking tax rates on the top 2 percent of U.S. wage earners, along with increases in capital gains and dividend income taxes, $600 billion in new taxes and a return to 2009 estate tax rates. This plan would raise $584 billion by capping tax deductions at 28 percent, and limiting itemized deductions for top earners. The plan also includes new authority to the President to raise the nation’s debt limit without congressional approval, while delaying Budget Control Act automatic spending cuts for a year, new 2013 spending of $50 billion on infrastructure, cutting $400 billion from health care spending, extending the Alternative Minimum Tax “patch,” and extending some business tax breaks while broadening unemployment compensation, and a possible extension of the current payroll tax deduction. The GOP plan targets $1.4 trillion in savings over 10 years, with about $800 billion coming from federal government spending cuts and $600 billion coming from new revenues achieved by eliminating tax breaks and loopholes and no change in Bush era tax rates. The GOP plan includes $600 billion in Medicare and Medicaid savings, and a reduction in cost-of-living adjustments in Social Security. The President’s plan is silent on entitlement rewrites, but it’s known government spending cuts would include $300 billion from mandatory federal programs, including farm program payments.
While a month ago the notion of a five-year Farm Bill seeing congressional action in 2012 was considered a long shot, the fact that both the Senate-passed bill and the House ag committee-approved bill carry significant program savings – $23 billion in the Senate; $35 billion in the House – means some hybrid version of a Farm Bill will be part of any fiscal cliff deal. Whether what eventually winds up in a deficit reduction/tax rate package is a straight extension of 2008 programs, a new five-year Farm Bill or a combination of extension and new program initiatives is still being negotiated, with the direct payment title and the title carrying food stamp benefits as the biggest hurdles that must be overcome. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) told a Washington, D.C., audience this week that she will not accept a straight extension of 2008 programs as that leaves 37 current programs unfunded while continuing direct payments to producers. Rep. Frank Lucas (R-OK), chairman of the House Agriculture Committee, told the same audience he can work with an extension as it would provide producers operational certainty, allow the U.S. Department of Agriculture to prepare for new programs and cuts in old operations, and give he and Stabenow the opportunity to hammer out a 2013 five-year Farm Bill come early spring. Neither of the ag panel chairs, however, gave any clue to what the eventual farm program component of the fiscal cliff deal might look like. More evidence the Farm Bill is going to be part of the fiscal cliff package is the flurry of meetings among the four top ag leaders in the House and Senate over the last two weeks. Already, press reports indicate some major shifts in position, particularly from Senate leaders. This week Stabenow said she’s willing to entertain deeper cuts to federal food stamp programs than her chamber’s bill now contains, if that’s what it takes to get a five-year package included in the fiscal cliff deal. At the same time, Senate ag panel ranking member Sen. Pat Roberts (R-KS) says he’s now willing to talk about revising his chamber’s Farm Bill commodity program title to include some form of marketing loan and deficiency payment scheme – a move that would mitigate southern producer opposition to the Senate’s risk/crop insurance approach – again if that’s what it takes to get a 2012 package done. Treasury Secretary Tim Geithner, in delivering the President’s plan to Capitol Hill, said several times last week farm program payment cuts will be part of a deal to get to the “down payment” all sides have agreed will be part of getting a fiscal cliff solution to Obama for his signature. The number being kicked around by the White House and congressional negotiators is $32-35 billion in cuts from direct payment, crop insurance and conservation programs, with some of the savings used to fund disaster relief programs. Unresolved and likely to be decided directly by House Speaker John Boehner (R-OH) and President Obama is how much to cut the Supplemental Nutrition Assistance Program (SNAP) – the old food stamp component of the Farm Bill – with the Senate currently willing to lop off about $4.5 billion, but the House seeking a much more ambitious $16 billion in cuts, primarily through elimination of states’ ability to set their own benefit eligibility criteria. The SNAP portion of the Farm Bill’s $1-trillion price tag over 10 years is roughly 80 percent. The President’s broad proposal does not include entitlement program changes so there’s no White House number for food stamp reductions.
The House Republican leadership this week named seven new GOP members to the House Agriculture Committee, and House Minority Leader Nancy Pelosi (D-CA) confirmed Rep. Collin Peterson (D-MN) will remain committee ranking member, but ag interests were surprised when House Speaker John Boehner (R-OH) made good on an earlier warning to his Republican colleagues that leadership is watching votes and public statements and those two factors will be part of the committee assignment process. The new GOP ag committee members are Dan Benishek (MI), Chris Collins (NY), Rodney Davis (IL), Jeff Denham (CA), Richard Hudson (NC), dough LaMalfa (CA) and Ted Yoho (FL). One vacancy remains on the Republican side of the committee. The poster boy for GOP leadership’s tough stance on committee assignments is Rep. Tim Huelskamp (R-KS), who lost his seats on the House Agriculture Committee and the House Budget Committee. Insiders say Boehner is trying to yoke up his party, getting members to toe the party line on votes and stop making public statements which undermine his leadership, especially as he goes toe-to-toe with President Obama on fiscal cliff negotiations. Huelskamp represents Kansas’ First District – “The Big First” – a seat previously held since 1963 by Bob Dole, Keith Sebelius, Pat Roberts and Jerry Moran, and is an outspoken fiscal and social conservative. He voted against the FY2012 GOP budget because he wanted deeper spending cuts and against the ag panel’s Farm Bill because it didn’t cut enough from the federal food stamp program. Saying he has not been given a reason for losing his ag panel seat, Huelskamp said this week, “This is clearly a vindictive move and a sure sign that the GOP establishment cannot handle disagreement.” Kansas ag interests let Boehner know they were not happy with the action as it leaves one of the nation’s largest ag states without a policy voice on the House ag committee. Other members losing key committee spots include Rep. David Schweikert (R-AZ) and Rep. Walter Jones (R-NC) who will not return to the House Financial Services Committee, and Rep. Justin Amash (R-MI) who also lost his seat on the Budget Committee. For his part, Boehner is quoted as telling his party steering committee the action was not taken lightly and in no way represented a “purge” of independent conservative voices. Ironically, Boehner himself was the victim of similar “discipline” in 1998, when he lost his chair of the House Republican Conference.
The trustee for liquidation of MF Global said in court papers the more than 28,000 customer claims filed will be totally cleared within the next few months, according to a report this week in PorkNetwork. Distributions to satisfy those claims continue to hinge on the outcome of claims against MF Global by MF Global Holdings Ltd, the parent company, and its British affiliate, according to trustee James Giddens’ progress report. Giddens said in his court filing all but 200 claims have been fully resolved, meaning an agreement has been reached between the claimant and the trustee on how much will eventually be paid to the customer. PorkNetwork reports more than 27,000 claims were filed by commodities customers, and 26,610 were allowed at a value of about $6.7 billion. Giddens says about $4.7 billion has been returned to commodities customers. More than 1,000 claims were filed by securities customers, with 207 allowed at a value of $276 million, according to Giddens’ report to the court.
Congress agreed this week to provide Russia with permanent normal trade relations as the Senate voted overwhelmingly to approve a U.S.-Russia trade deal, clearing the measure for President Obama’s signature. At the same time, the U.S. Department of Agriculture led a U.S. trade mission to Russia this week where Under Secretary for Farm & Foreign Agricultural Services Mike Scuse discussed trade, including sanitary/phytosanitary issues, with his Russian counterpart, and told the media the talks “went better than anyone had anticipated.” The Senate-approved bill removes Russia and Moldova from application of what’s known as the Jackson-Vanik amendment, trade punishment for governments which interfere in Jewish emigration to Israel. The amendment was originally enacted in 1974 to punish the old Soviet Union for blocking such emigration. While Russia allows emigration, the Congress has had to renew its trade relationship with the Russia annually since 1994, and when Russia was admitted to the World Trade Organization this past summer, continued application of the Jackson-Vanik amendment meant all other WTO members had greater access to Russian markets than did the U.S. The American Soybean Association, the National Chicken Council and the National Turkey Federation joined other ag groups in Washington, D.C., in praising the Senate action and urging President Obama to sign the new law immediately.
The U.S. Department of Agriculture’s Drought Monitor shows more than 60 percent of the U.S. still suffering some drought impact, with 19 percent of the worst conditions centered in the Great Plains, which is raising concerns for the winter wheat crop. USDA said this week the winter wheat crop’s development stage is the worst since it started tracking crop condition ratings 25 years ago. The department’s Office of Chief Economist said the situation is particularly serious for the hard red winter wheat crop, with the November 25 report showing 25 percent to nearly 70 percent of the crop rated poor to very poor in South Dakota, Nebraska, Oklahoma, Texas, Colorado and Kansas. Overall, only 33 percent of the crop is rated as good to excellent. In a related report, USDA reported this week the Conservation Reserve Program holds 2.5 million fewer acres than it did a year ago and now sits at 27.1 million acres, based on expiring acres, re-enrollments and accepted new program acres. The most land put back into the CRP is in North Dakota, Montana, Texas, Kansas and Minnesota, USDA said.
The House Agriculture Committee’s subcommittee on general farm commodities and risk management will hold a hearing December 13 in Washington, D.C., to examine “Dodd-Frank Derivatives Reform: Challenges Facing U.S. and International Markets.”
The U.S. Department of Agriculture’s Commodity Credit Corp. announced last week that its borrowing rate-based charged for December 2012 is 0.125 percent, unchanged from November. For 1996-2012 crop year commodity and marketing assistance loans, the interest rate for loans disbursed in December is 1.125 percent, also unchanged from November. Farm storage facility loan interest rates are unchanged from November and are as follows: 1.125 percent for seven-year loans; 1.75 percent for 10-year loans, and 1.875 percent for 12-year loans.
Several agricultural and shipping groups, including the National Grain & Feed Association and the National Industrial Transportation League, sent President Obama a letter this week outlining the critical need to increase water flow from the Missouri River reservoirs to maintain navigation between Cairo, IL, and St. Louis on the Mississippi River. Meanwhile, Bloomberg reported that even with increased water flow, barge traffic will be stalled. The U.S. Army Corps of Engineers reported this week that pressure from Senators representing Midwest states caused the Corps to expedite its analysis of increasing the river flow from the Missouri River. However, the entire South Dakota congressional delegation, along with members from Kansas, North Dakota and Montana, also wrote to Obama this week urging him to deny any emergency request to increase Missouri River flow into the Mississippi. The shipper letter asks Obama, the U.S. Army Corps of Engineers, and the Federal Emergency Management Administration to act immediately to ensure water levels on the mid-Mississippi River can sustain navigation. Specifically, the letter calls for “release of measured but sufficient flows from Missouri River reservoirs to maintain a nine-foot navigation channel … to sustain commercial navigation.” Obama is also asked to waive government bidding rules that slow down the Corps ability to move immediately blast rock “pinnacles” near Grand Tower and Thebes, IL, which create navigation hazards.