Last week President Obama released his plan to reduce the federal budget deficit by $4 trillion over the next 10 years. The plan includes net savings of $33 billion from farm programs, $30 billion of which comes from eliminating direct payments over the next ten years. But there’s an additional $10 billion in proposed cuts to crop insurance spending and reducing the growth in conservation programs. The plan would also extend the Supplemental Revenue Assistance (SURE) program, otherwise set to expire this month, through 2016 which reduces total savings. While farm program spending will probably be reduced in the future, there is little chance that Congress will accept the President’s plan without modification.
Further cuts to the crop insurance are a big concern for the farm sector. Just last year government support for the industry was reduced by $6 billion over 10 years and many farmers and farm groups have identified crop insurance as the most critical part of the farm safety net today. The participation rate for crop insurance is put at 83 percent of farmers and the government pays 50 percent or more of the actual policy premium. The president’s plan would trim 2 percent off of the government’s share of the premium if the subsidy is more than 50 percent of the actual cost. The plan would also lower the cap for administrative and operating expenses saving $3.7 billion over 10 years.
Crop Insurance Deadline Reminder: According to USDA’s Risk Management Agency (RMA), 15 crops (including wheat, barley, canola and oats) have a deadline for buying crop insurance of September 30 in many states. USDA posted 2012 projected prices on September 15. These prices are the new minimum prices for crops planted this fall. For producers that already have RMA policies on fall crops, the policies will renew automatically if no action is taken.
The Senate last week moved forward with a bill extending the Generalized System of Preferences that reduces tariffs on imports from most countries. An amendment to renew the Trade Adjustment Act (TAA) will be offered when the bill reaches the Senate floor. If the bill with the amendment passes the Senate, it will set the stage for the president to submit the three free trade agreements to Congress for approval. Almost everyone agrees that approval of the three free trade agreements would be positive for agriculture sector exports.
The government of Canada is asking the Obama administration for clarification of “buy American” language in the president’s $447 billion “job creation” stimulus spending plan. The language is similar to language that was included in the 2009 stimulus package. The proposed bill would prohibit the use of foreign produced iron, steel and other manufactured goods from being used in the proposed infrastructure projects. In the 2009 bill the U.S. agreed to exempt Canada from the buy-American provision, and a similar agreement is likely this time as well.
This week Congress will need to pass another “continuing resolution” to keep the government running past the end of the 2011 fiscal year. Why? Because so far Congress has not finalized any of the 12 appropriations bills that are needed to fund the various government agencies. The debt limit agreement reached this summer put a ceiling on fiscal 2012 spending but Congress still needs to decide how the money is divided up among the various parts of government. Omnibus spending bills have a tendency to attract amendments that might not otherwise attract enough votes to pass.
USDA has announced the latest round of funding for the Rural Energy of America program (REAP). Part of the new funding will be spent to install new blender pumps to distribute E-15. One hindrance for the widespread adoption of higher ethanol blends is the lack of enough underground tanks & pumps at most service stations able to handle a range of ethanol blends from E-10 to E-85 as well as straight unleaded, premium, diesel, etc. Blender pumps draw ethanol from a single tank and blend whatever the customer wants, right at the pump. The White House wants 10,000 such “flex-fuel” pumps across the country within five years (representing a five-fold increase over the current number).