D.C. Watch: Nov. harvest report to remain unchanged

October 30th, 2012

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Category: Grains, Oilseeds

(AgProfessional) – USDA will not adjust corn and soybean harvested acreage in the November Crop Production report. Many people were surprised that the corn harvested acreage actually went up in the October report despite the searing drought that cut yields in some places to near zero. Last week USDA officials said they won’t have any new information for next month’s report but will do a more thorough survey in December and make any needed changes (to acreage harvested) in the January Annual Crop Production report.

The free trade agreement between the U.S. and Panama will go into effect at the end of this month. This is the last of the three free trade agreements passed last year. The U.S. exported more than $500 million of agricultural products to Panama last year and Panama is one of the fastest growing economies in Latin America. Under the agreement Panama will eliminate tariffs and other barriers to U.S. exports with an immediate end to the 30% tariff on prime and choice cuts of beef. All other duties will be phased out over 15 years.

The expiration of the farm bill put an end to the Milk Income Loss Contract payments that provided assistance to small dairies. Another casualty was the end to funding for the Market Access Program (MAC). This program helps more than 1,000 companies sell their products overseas. And Agriculture Secretary Vilsack says that without the $200 million MAC program, U.S. agricultural exports may not reach the new record high this fiscal year as previously forecast. But aside from these two, most other elements of farm policy are still in place, funded and operating.

Crop insurance companies are working overtime to speed indemnity payments to farmers this fall. Crop insurance payouts for this year’s crop are expected to be $25 billion or more, more than double the previous record of $10.8 billion in 2011. This year about 80% of the country’s corn land was covered by crop insurance, compared to just 15% in 1988. Insurance companies expect to process claims for half of the 1.2 million policies purchased in 2012. Some policies may trigger payments of over $1,000 per acre for this year’s corn crop. By mid-October companies had processed 146,000 claims and paid out more than $2.6 billion.

Claims of more than $200,000 automatically trigger audits by crop insurance companies which may delay payments. But companies are making partial payments to farmers based on planting prices guaranteed last spring, even for farmers with the harvest price option. They will make final payments after the harvest prices are calculated. Farmers invested more than $4 billion to purchase crop insurance this year, with policies covering 281 million acres of eligible crops.

A link between crop insurance and conservation compliance “just isn’t going to happen” in any new farm bill according to Agriculture Secretary Vilsack. He says he has talked with leaders and members of Congress and found little support for such linkage. In past years, farmers had to be in compliance with certain conservation provisions to be eligible for farm program payments, like direct and counter-cyclical payments. Conservation compliance was last linked to crop insurance in 1996.

In this week’s debate, President Obama made a startling statement that the sequestration budgets cuts scheduled to go into effect by law at the beginning of January “will not happen”. Since then the administration has had to backtrack because the only way to avoid the new taxes and big spending cuts is for Congress to change the law. Don’t rule that out.

Read on: Many people in Congress and even Romney and Obama are in rare agreement that sequestration will badly harm the economy; just disagreeing over which elements will hurt most – the broad tax hikes or big spending cuts (particularly in national defense).

For that reason, there is an improving outlook for some last minute action; either in the lame duck session after election or shortly after the new Congress is sworn in come January.

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