Farmers planted 96.4 million acres of corn this spring, slightly ahead of average trade estimates of 96.1 million acres, and 5 percent above last year, according to USDA’s annual acreage report released this morning. Every acre of that corn will be needed to hold down costs to livestock producers, ethanol producers and food companies, given the drought that has developed in recent weeks across the Midwest.
USDA says farmers increased soybean plantings by 1 percent at 76.1 million. That compares to the average trade estimate of 75.5 million acres, according to Reuters, of 75.5 million acres. Wheat acreage is up 3 percent from last year, while cotton acreage is down 14 percent.
A separate report shows corn supplies tightening. Stocks were down to 3.15 billion bushels June 1, 14 percent below the same time in 2011. Some 667 million bushels of soybeans were in storage June 1, 8 percent more than a year earlier.
Midwest Drought Pressuring Prices, Supplies. The drought, which is bringing back memories of the 1988 drought that devastated the northern Plains, is most severe from Arkansas up through Missouri, Illinois and Indiana but it’s also being felt in Iowa, Ohio and other states.
Analysts surveyed by Reuters have been forecasting average corn yields at 157 bushels, well below USDA’s projection of 166 bushels, and the predictions will only go down. Rich Nelson, an analyst with Allendale Inc., says his firm’s estimate will likely fall to 145.35 in July from this month’s 153.9. Analysts at Rabobank say corn prices could reach $7.50 a bushel in coming months and even threaten previous records of $7.99 for December contracts, which are now running around $6.30.
Drought Could Figure in Farm Bill Politics, Though Soaring Prices Boost Farm Profits. A drought of this magnitude across the heart of the Corn Belt could be used in Congress to pressure the House to act on a farm bill. Agriculture Secretary Tom Vilsack did just that this week, telling reporters who asked him about the drought that the House needed to pass a farm bill “because right now there isn’t a disaster program in place, so get the work done.” Vilsack was referring to a disaster assistance program that expired last fall.
But most farmers do carry crop insurance, and that coverage, coupled with higher prices, could actually wind up significantly boosting farm income this year, according to University of Illinois economist Gary Schnitkey: “Grain farm incomes likely will be above projections made in winter of 2012, assuming that crop prices increase if crop yields are below trend-line levels,” Schnitkey wrote.
A 1,200-acre Illinois corn and soybean farm could have expected net income of $167,000 this year based on yield and price forecasts this winter. However, in a severe drought (and a $7.50 corn price) earnings would shoot to $292,000. Of course, farms that didn’t buy crop insurance could face losses this year, and growers who hedged a lot of this year’s crop at earlier, lower prices won’t benefit as much from the drought-driven surge in prices, Schnitkey said.
It’s also worth noting that the higher commodity prices this year would be calculated into whatever revenue-guarantee program Congress creates in the new farm bill. The Agriculture Risk Coverage program in the Senate farm bill (S 3240) would trigger subsidies when farm-level or county crop revenue falls below the average for the previous five years. The baseline that the Congressional Budget Office is using to estimate the cost of the farm bill projects an average corn price of $4.96 this year, down from $6.12 in 2011.
Lucas: One-Year Extension May Be Needed. Facing resistance in the House to passing a farm bill, House Agriculture Chairman Frank Lucas is starting to sound like he’s building a case for passing a one-year extension of existing programs. During an interview on Agri-Talk radio. Lucas suggested Thursday that a one-year extension of existing programs may be needed just because of the time required for USDA to implement the new bill, which means writing rules, developing software and training employees. The bill is certain to make sweeping changes in commodity programs and also is likely to create new crop insurance products. “We’re getting to the point where we may have to have a one-year extension … so that producers can rationally decide what to do, ” he said. USDA officials had no immediate comment.
If the House does pass the bill, it could be conferenced “relatively quickly” with the Senate, but “then the question becomes” whether that compromise version would pass the House and Senate, he said. (He didn’t say why he raised that question, but here’s one reason: The House bill will likely cut the Supplemental Nutrition Assistance Program by about $10 billion more than the Senate version. Whatever level the conferees compromise on is likely to make many members of the House and Senate unhappy.)
House Agriculture’s markup is set for July 11, a Wednesday, and is likely to take more than a day, Lucas said. Some tea party conservatives in the House are working to block the farm bill from getting to the floor, but if it does there could be many amendments offered attacking various parts of the legislation. Lucas indicated he expected the rule for the bill to permit votes on a wide range of amendments, which is just the scenario many farm groups fear. “We need a rule that would at least avoid redundant amendments,” Lucas said. That’s a low bar.
House GOP Advances Plan to Slash EPA’s Regulatory Reach. House Appropriators have advanced on a near party-line vote a fiscal 2013 spending bill that would slash EPA’s budget and restrict its regulatory authority, reports CQ’s Matt Fuller. Arizona Republican Jeff Flake was the lone member to break party ranks in the 26-19 vote. The bill, which would cut EPA’s budget by 17 percent, includes a number of policy riders, including one that would prohibit the EPA from changing or issuing guidance or rules clarifying the federal jurisdiction of the Clean Water Act (PL 92-500) and another provision that would bar EPA from regulating greenhouse gas emissions from livestock. Yet another would block EPA from issuing guidance on false or misleading pesticide product brand names.
EPA: Superfund Bill Could Hinder Manure Cleanup. Elsewhere on the Hill this week, EPA has been fighting attempts to ease regulation of livestock farms. The agency is warning lawmakers that a bill (HR 2997) to exempt livestock farmers from the Superfund law could prevent authorities from promptly protecting the public from a manure spill. Mathy Stanislaus, assistant administrator of EPA’s Office of Solid Waste and Emergency Response, told a House Energy and Commerce subcommittee (transcript) that the agency’s hands would be tied even when the failure of a large manure lagoon presented “a substantial danger to public health and the environment.” EPA also would lose authority under the law — the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA — to issue abatement audits requiring immediate responses to damaging releases, he said. The full committee’s ranking Democrat, Henry Waxman of California, called the bill a “Trojan cow” intended to exempt giant agribusinesses from liability when the pollute the groundwater.
The bill’s sponsor, Billy Long, R-Mo., told the subcommittee EPA was unfairly applying to farms a law intended for industrial disasters like Love Canal. “It does not make sense to lump tens of thousands of farms and livestock producers under the same severe liability provisions that apply to the nearly 1,300 federal superfund toxic waste sites,” Long said. But when Waxman asked Long whether he intended to shield polluters from liability and shift cleanup costs to taxpayers, Long replied, “Asoslutely not. But I want the EPA to use the rules that are on the books now for such ventures.” Waxman pressed Long as to whether he would agree to rewrite the bill to “ensure that the polluter pays principle is upheld.” Long said he would have to get back to him. Walter Bradley, representing the Dairy Farmers of America, told the committee the bill was needed to ensure that “animal manure does not necessitate an emergency response nor does it create a Superfund site.”
How the Tomato Lost Its Flavor — And Could Get It Back. The reason those bright red supermarket tomatoes are often tasteless could provide clues to giving them new zing. A gene inactivated by a chance mutation and used by breeders to make tomatoes uniformly scarlet when ripe also plays an important role in producing the sugar and aromas needed to give a tomato flavor, according to a paper in the journal Science. The New York Times reports that the findings give breeders the road map to make tomatoes tastier — and still red. “That mutation has been introduced into almost all modern tomatoes. Now we can say that in trying to make the fruit prettier, they reduced some of the important compounds that are linked to flavor,” said Harry Klee, a University of Florida tomato researcher who was not involved in the research. The scientists inserted an intact version of the gene into tomatoes and increased the content of sugar as well as lycopene, an important antioxidant. That may not be enough to make the tomatoes flavorful, though. The timing of the harvest is believed to play a role, too.
Insurance: A Hot Topic on the Hill. The Environmental Working Group drew a good-sized crowd of congressional staffers Thursday for a briefing on the Senate farm bill’s shift away from traditional commodity programs to insurance. In fact, attendance was so good, CQ’s Ellyn Ferguson tells me, that EWG lobbyist Scott Faber wondered aloud if it had something to do with the Supreme Court’s ruling on the health care law. “You do know this is a briefing on crop insurance, not health insurance,” Faber declared.