Washington Insider -- Tuesday

By DTN's Washington Insider

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

USDA Trims Interest Rate on Commodity Loans

Commodity loans disbursed in November will carry a 1.25% interest rate, down from 1.375% in October and takes the interest rates back to the level last seen in August, according to USDA’s Commodity Credit Corporation (CCC).

Interest rates for Farm Storage Facility Loans approved for November are as follows, 1.75% with seven-year loan terms, down from 1.875% in October; 2.125% with 10-year loan terms, unchanged from 2.125% in October and; 2.25% with 12-year loan terms, down from 2.375% in October.

The interest rate for 15-year Sugar Storage Facility Loans for November is 2.375%, down from 2.5% in October.

Commodity loan usage is expected to increase for 2015 crops, given current prices and the attractive interest rates offered by the CCC. As of Oct. 26, farmers have put 64.320 million bushels of 2015-crop corn under loan compared to the 2014-crop total of 574.223 million bushels and the 2013-crop total of 460.152 million bushels.

For soybeans, producers have put 25.107 million bushels of 2015-crop soybeans under loan as of Oct. 26. That compares to the 2014-crop total of 80.051 million bushels and 49.183 million bushels of 2013-crop soybeans.

For wheat, producers have put 41.478 million bushels of 2015-crop wheat under loan as of Oct. 26, nearly even with the 2014-crop total of 43.159 million bushels and well above the 2013-crop total of 24.679 million bushels.

This marks the third adjustment to interest rates on commodity loans as USDA increased the rate in February to 1.25% (1.125% in January) and then raised the level again in September to 1.375% from the prior 1.25% mark. The rate decline comes as farmers are winding down the harvest of corn and soybeans, with many eyeing the commodity price support loan program as a way to get temporary financing.

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FDA Finalizes Three Food Safety Rules

Three food safety regulations impacting produce farmers and companies that import food into the United States were finalized by the FDA and sent to be published in the Federal Register today, the agency said in a statement.

The FDA had to finalize the produce safety, foreign supplier verification and third party accreditation rules by Oct. 31. The agency said it will share more information about the final rules when they are published.

The regulations fall under the Food Safety Modernization Act (FSMA) enacted in 2011.

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Washington Insider: Brief Crop Insurance Fight

For the time being, the budget deal now moving through Congress includes modest cuts for crop insurance. Bloomberg is reporting that a move to limit profits for insurers and require the industry to renegotiate its terms with the government, designed to save $3 billion is leading to strong push-back from the House and Senate agriculture committees to overturn the provisions. They seem to be succeeding.

Bloomberg argues that the crop insurance industry got nearly everything it wanted in the 2014 farm bill “from gaining language that puts any savings created via negotiations with the government elsewhere in the program to stopping an effort to make federal officials disclose crop-insurance subsidies.”

Still, Bloomberg says that outside farming districts, crop insurance has numerous foes, from incoming House Speaker Paul Ryan to President Barack Obama, both of whom have repeatedly called for cuts. It also notes that growth in the program’s cost draws broader attention, making its political defense more difficult than when the program was less expensive.

The agency says crop insurance supporters are now playing their most powerful card, “the threat to peel away enough rural Republicans to derail the budget vote.” This enabled them to extract assurances that the changes would be reversed in a December omnibus bill in return for an equal amount of cuts to other US Department of Agriculture programs.

Will the aggie strategy work? Bloomberg says that “much can change in a month, leading to the chance that the industry and its supporters may yet suffer a big loss.” Bloomberg does not seem to expect that to happen, however, so the next big issue is what gets cut to allow the crop insurance spending to escape whole.

The axe could fall in several areas, including food stamps, conservation, rural development, or somewhere else. So, Bloomberg pronounces that “by defusing one controversy with a promise, lawmakers are simply creating another one.” Then, it waxes philosophical, suggesting that the aggies have made the calculation that “the sacrifice is worthwhile.”

In the end, Bloomberg seems bitter about its observation and opines that it says a lot about where, for all the talk about additional stakeholders in agricultural policy, the rising power of the consumer and the broadening of the USDA’s mission, farm-lobby power really lies in 2015. “It’s a crop-insurance world. All other USDA programs are just livin’ in it,” Bloomberg says.

Well, maybe. It is instructive to think back on the 2014 Farm Bill debate, when a very large spending program that cost almost $50 billion over a decade was scrapped in favor of beefed up crop insurance. The green-eyeshade guys in Congress called this a savings, although there were skeptics who argued that several of the insurance programs may be more costly than initially estimated. At the same time, it is not surprising that ag interests would push hard to prevent Congress from changing the game this soon.

And, Bloomberg is right that it will be interesting to see where the round of offsetting budget cuts focuses and how toxic that debate may become. It seems likely that the aggies will prevail with their promise to protect crop insurance, but the odds are that when the other interests see more clearly what the Congress has in mind for them they will find a way to join the budget fight. This suggests that we will see a robust renewal of smoke and mirrors and other gimmicks, --not an altogether happy prospect, and one that may well test the budget acumen of Rep. Paul Ryan early in his new leadership role, Washington Insider believes.

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(GH/SK)

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