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.

Budget Deal Offsets Include Cuts to Crop Insurance

A budget deal announced late on Oct. 26 would modestly increase spending, cut some social programs and includes a suspension of the debt limit until March 15, 2017, averting a government debt default in November. It still faces House and Senate votes.

The budget offsets include crop insurance via the Standard Reinsurance Agreement (SRA), which would establish a target rate of return for the approved insurance providers that does not exceed 8.9% of retained premium for each of the 2017 through 2026 reinsurance years.

Regarding crop insurance, the proposed language would reduce the targeted return from 14.5% to 8.9%. Companies have been running just above break-even since the last SRA was signed (the 14.5% is targeted return on retained premium, which has resulted in actual return on retained premium of about 5% since 2010, and just above break-even when considering all costs).

For more details on the proposal, see http://dld.bz/…

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USDA: Nearly $4 Billion 2014-Crop ARC/PLC Payments

Nearly half the farms signed up for the Ag Risk Coverage or Price Loss Coverage (PLC) programs began to receive safety-net payments totaling nearly $4 billion for the 2014 crop year with those payment starting on Oct. 26, according to USDA.

The corn price for 2014 is 30% below the historical benchmark price used by the ARC-County program, USDA noted in a release, and revenues of the farms participating in the ARC-County program are down by about $20 billion from the benchmark during the same period.

The ARC/PLC programs primarily allow producers to continue to produce for the market by making payments on a percentage of historical base production, limiting the impact on production decisions, according to USDA.

Nationwide, 96% of soybean farms, 91% of corn farms, and 66% of wheat farms elected the ARC-County coverage option. Ninety-nine percent of long grain rice and peanut farms, and 94% of medium grain rice farms elected the PLC option. Overall, 76% of participating farm acres are protected by ARC-County, 23% by PLC, and 1% by ARC-Individual.

For more coverage of ARC-PLC payments, go to http://dld.bz/…

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Washington Insider: Changing Views on Climate Change

There has been a lot of press on climate change recently with agriculture prominently in the center of a great deal of the discussion. The super hurricane that hit western Mexico last week along with mounting expectations for an unusually severe El Niño this winter, in addition to observations that global warming is taking place already in some locations, has riveted attention to the issue across many parts of the economy.

One reason is that the world now is at a critical point in global climate talks, with leaders set to meet next month in Paris to work out details of a plan to reduce the long-term trajectory of carbon pollution. News service Bloomberg notes that some of the biggest impediments to the talks have been removed in recent months as significant commitments were made by China and India, and the prime ministers of Australia and Canada were replaced by leaders thought to be more sensitive to climate change.

Clearly, the United States is expected to play a major role in the Paris talks and Bloomberg is now arguing that attitudes are changing rapidly in this country and even that, surprising as it may seem, climate skeptics long reluctant to discuss the issue are now changing their views rapidly.

For example, Bloomberg reported last week that three-quarters of Americans now accept the scientific consensus on climate change, the highest level in four years of surveys conducted by the University of Texas at Austin.

The Bloomberg report focuses especially on changes inside the GOP, where the turnabout is seen as “remarkable.” Some 59% of Republicans now say climate change is happening, up from 47% just six months ago, Bloomberg says.

This is hard to believe, Bloomberg recognizes: “When public opinion shifts this much in a single survey, a bit of skepticism is justified.” Yet these results are precisely in line with a separate survey published this month by the University of Michigan, which found that 56% of Republicans believe there is solid evidence to support global warming, up from 47% a year ago. The Michigan poll also found bipartisan agreement with climate science at the highest level since 2008.

The Bloomberg report speculates that the changing views by Republicans could “strand” some of the leading presidential candidates in an increasingly unpopular position. Many in the party reject mainstream climate science, and not just at the margins. Republican leaders including Senate Majority Leader Mitch McConnell and top presidential contenders Donald Trump, Ben Carson, and Marco Rubio articulate views that would be considered extreme in other countries.

Last year in the United States, Bloomberg interviewed dozens of former senior Republican congressional aides, lobbyists, and staff at nongovernmental organizations. While many Republicans privately recognized the need to address climate change, in stark contrast to their party’s public stance, but saw little political benefit in speaking out.

Bloomberg still thinks Republicans are mixed in support for policies to curb climate change and notes that the Texas poll found just 26% of Republicans would be more likely to vote for a candidate who supports a tax on carbon emissions, a policy with majority support among Democrats.

On the other hand, half of Republicans said they would be more likely to vote for a candidate who wants to reduce the use of coal or require utilities to obtain a certain proportion of electricity from wind and solar.

Well, Bloomberg is right that changes in position as dramatic as those being reported are difficult to accept at face value. On the other hand, really unusual climate and weather events are piling up, and scientific data seem to be sharpening the warnings about higher temperatures and rising seas. If this winter’s El Niño weighs in as significantly as it seems it might, that will be another powerful factor in the process of deciding how serious global warming might become and what policies should be imposed to help control it, Washington insider believes.

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(GH/SK)

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