Washington Insider -- Wednesday

By DTN's Washington Insider

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Conferees Still Negotiating Water Projects Bill

The water resources development bill that currently is the subject of a House-Senate conference, appears to have cleared a first procedural hurdle. Sen. Barbara Boxer, D-Calif., the lead negotiator for legislation, says that Senate conferees have come to an agreement on a report and are awaiting a response from House conference members.

The coming language is expected to increase funding for harbor maintenance projects and also could accelerate work on locks and dams. Conferees have also signaled that the agreement will likely shift some of the cost of the way-over-budget Olmsted lock and dam project off the waterways trust fund, thus freeing up additional money for other projects.

For seaports, the bill is expected to authorize a far bigger share of annual tax receipts collected for harbor maintenance spent on dredging work, which can allow bigger container, grain and energy ships to reach more ports — especially along the Gulf region and East Coast.

It will be the first major update of the Water Resources Development Act since 2007. Once the conference deal is announced, floor votes are expected to follow in short order.

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U.S., Japan Talks Continue on Cutting Tariffs on Beef, Pork

Negotiators from Japan and the United States remain locked in negotiations on opening each other's markets to increased completion. U.S. officials are particularly interested in convincing Japan to lower its tariffs on imports of U.S. beef and pork, but the gaps between what is being asked and what is being offered are significant.

For example, Japanese media report that U.S. negotiators sought a reduction in beef tariffs from 38.5% to 9%, while their Japanese counterparts offered a reduction to 20%. The United States reportedly also sought a 10-year phase in period for a reduced tariff while Japan offered a 20-year phase-in period.

An agreement between Japan and the United States on these issues is seen as a major component of the Trans-Pacific Partnership free trade currently under discussion among 12 Pacific Rim nations.

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Washington Insider: Findings of the Latest Ag Census

Last week, USDA released the results of the 2012 Census of Agriculture and, once again, the agency seemed to have trouble deciding what it wanted to emphasize.

For example, Secretary Tom Vilsack has long enjoyed hammering on the dangers he sees lurking in the sector's age trends and often suggests that he thinks farmers are becoming dangerously elderly. However, the new data say, somewhat embarrassingly, that a lot of "young" farmers have recently taken up the vocation and that "more than 20% have operated their farms for fewer than 10 years."

This is supported by the report that numbers of young, beginning principal farm operators have grown some 11.3% since the last Census of Agriculture in 2007. USDA even rushed to take credit for some of that increase in a press release that noted that U.S. rural development programs seemed to be working. Critics likely are unconvinced.

Part of the problem with the Ag Census is, of course, its definition of a farm. In Census parlance, any operation that sells — or, could have sold — $1,000 worth of products is a farm. Thus, many "farmers" are actually retired and/or most mainly work at something else like veterinary services or other service providers who may live on a farm site but have only modest interest in the economic and demographic trends the secretary emphasizes.

The Census does include important measures of trends, and found the average farm to be 434 acres in size. The number of farms was pretty steady between 2007 and 2012, down a little from 2.2 million to 2.1 million even as the market value of agricultural products soared from $297 billion to $395 billion. Crop sales accounted for $69 billion of the increase and livestock, $29 billion. The number of commercial farms with sales above $500,000 rose from 116,000 to 155,000, a considerable jump.

While most farms are small, the value of agricultural production is concentrated in many cases in very large farms. The largest farms with sales of $1 million or more made up only 4% of all farms, but accounted for a huge 66% of the total market value. In 2007, those shares were 2.5% of farm numbers and just under 60% of total value. The secretary didn't emphasize these figures.

Still, it turns out that a lot of farms — nearly 1.2 million — are extremely small with annual gross sales of farm products of less than $10,000. Of these, nearly 900,000 had annual sales of agricultural products plus government payments of less than $5,000 and average incomes of $1,500.

The Census also reported on organics and indicates that the sector is consolidating significantly, with the number of farms down to just over 14,000 while sales are increasing rapidly from $1.76 billion in 2007 to $3.1 billion in 2012. The release indicated that organic product sales were $35 billion in 2013, suggesting an enormously small share of the total amount retained by farmers, and one that USDA did not discuss.

So, we knew from other economic data that agriculture's balance sheet is strong and thus find it unsurprising that younger investors are being attracted — although we do not know yet how strong, or how vital those operations are. It remains the work of USDA professionals to sort out the important trends and especially to focus on the commercial business operations so that more nuanced evaluations of investment and growth can be factored into future policy discussions, Washington Insider believes.

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