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Key Ag Issues for Community Bankers
ICBA’s Quarterly Agricultural Report
By Mark Scanlan, Vice President, Agriculture and Rural Policy
There has been a flurry of agricultural activity in recent weeks, and ICBA has been keeping
track of all the latest news. Here’s a breakdown of the top news and information on the
agricultural front.
House Ag Chairman Discusses Next Farm Bill
House Agriculture Committee Chairman Collin Peterson (D-Minn.) this week presented his
thoughts on the next farm bill during a mid-week breakfast gathering. Peterson reiterated
his previous comments that he will conduct hearings in Washington and across the nation
this spring. The committee will continue hearings until July and then discontinue hearings
until after the mid-term congressional elections in November.
Peterson expressed concerns that the next Congress will need to tackle the growing budget
deficit and said he is asking farm groups to identify potential cuts that could be made in
farm programs. However, he emphasized that he would be opposed to cutting farm
programs unless all other programs in the federal budget are cut proportionally. He said he
expects that some members of Congress will seek to reduce the deficit by increasing
revenues (raising taxes).
The House Agriculture Committee sent a March 4 letter to House Budget Committee
Chairman John Spratt (D-S.C.) requesting that there be no cuts to program benefits under
the 2008 farm bill. The Agriculture Department issued its agricultural budget proposals in
February. However, most of these proposals are expected to get little traction in Congress.
Convention Workshops of Interest to Ag Bankers
ICBA’s National Convention and Techworld, which begins this Tuesday, will feature more
than 60 workshops and more than 200 exhibitors. The convention features several
agriculture-oriented workshops and speakers such as Federal Reserve Chairman Ben
Bernanke, FDIC Chairman Sheila Bair, Comptroller of the Currency John Dugan, ICBA
President and CEO Cam Fine, ICBA Chairman Mike Menzies and Forbes Inc. Chairman and
CEO Steve Forbes. View the Full Program.
Administration Pushing Steep Crop-Insurance Cuts
The USDA is seeking steep cuts in the federal crop-insurance program as part of its
renegotiation proposals to revise the Standard Reinsurance Agreement (SRA). The 2008
farm bill already reduced spending on crop insurance by several billion dollars and directed
the USDA to renegotiate the SRA to achieve further savings and efficiencies. However, the
USDA appears to have gone far beyond congressional intent by initially proposing $8 billion
in cuts before recommending approximately $7 billion in reductions.
The USDA’s proposals have caused the Congressional Budget Office to reduce the
agriculture budget baseline by $4 billion. Crop-insurance agents and companies have
concluded USDA’s proposals will reduce administrative and operating payments by 31
percent. Farm groups sent a January letter expressing concerns over consolidation of
insurance companies and a reduction in insurance access for producers. Producers must
sign up for crop insurance by March 15.
District Fed Surveys Note Key Agriculture Trends
The March Fed Letter, published by the Federal Reserve Bank of Kansas City, includes
results of the bank’s fourth-quarter survey of agricultural credit conditions. The bankers
reported higher farm incomes resulting from higher crop prices and higher yields, which also
raised real estate prices. However, the Federal Reserve Bank of Chicago’s recent AgLetter
reports that the seventh district’s agricultural credit conditions were mixed in the fourth
quarter of 2009 because of greater financial stress relative to a year ago. The University of
Missouri’s Farm and Agricultural Policy Research Institute released its 2010 Agricultural
Outlook Briefing Book, which notes the strength of the farm economy will depend on the
overall economy this year.
Senate Jobs Bill Includes Biodiesel Tax Credit and Disaster Aid
The Senate this week voted 62-36 to pass a jobs bill (H.R. 4213) that includes a federal $1a-gallon biodiesel tax credit. Former Senate Agriculture Committee Chairman Tom Harkin
(D-Iowa) praised the inclusion of the provision as a way to create jobs and strengthen the
economy. Although the tax credit is retroactive to the beginning of the year, it only lasts
through 2010.
The bill also includes disaster aid for farmers endorsed by Senate Agriculture Committee
Chairman Blanche Lincoln (D-Ark.) and Sen. Thad Cochran (R-Miss.). The disaster aid would
fund approximately $1.5 billion in supplemental payments to producers who suffered crop
losses during 2009 and are in counties declared “primary” disaster areas by USDA. The bill
must now be reconciled with the House before it can be sent to the president.
USDA Business and Industry (B&I) Loan Program
The USDA intends to improve the usability of its Business and Industry loan program. Due
to the stimulus bill Congress passed in 2009, the USDA program will allow lenders to make
an additional $1.7 billion in rural business loans, but the additional funds expire at the end
of this fiscal year on Sept. 30.
In February, the USDA sponsored a stakeholders meeting in Dallas to discuss further
enhancements to the program. ICBA and two member community bankers attended. USDA
Rural Development administrator Judith Canales subsequently sent a letter to meeting
participants outlining future changes that USDA officials hope to make to the program,
including implementing a preferred lender program. ICBA sent a March 1 letter to USDA
offering recommendations to improve the program. View Presentation from Meeting.
House Ag Republicans Underscore Key Ag Policy Issues
House Agriculture Committee ranking member Frank Lucas (R-Okla.) has issued a series of
weekly radio commentaries discussing the views of committee Republicans. A recent “Ag
Minute” includes an exhortation to stop the regulatory expansion of the Environmental
Protection Agency. He said such regulatory expansion will harm farmers and ranchers, and
House Republicans have introduced legislation to limit the EPA. Another recent commentary
highlights concerns over Brazil’s retaliation efforts aimed at U.S. exports and how this
measure will impact American agriculture.
Kansas City Fed to Host Ag Symposium
The Federal Reserve Bank of Kansas City is bringing banking and business leaders,
government officials, and academia together to explore the forces shaping the profitability
and structure of the agricultural marketplace in the 21st century. The symposium,
“Farming, Finance and the Global Marketplace,” is planned for June 8-9 at the Kansas City
Fed. E-mail the Kansas City Fed to request an invitation.
ICBA will continue monitoring these and other agricultural issues to keep the nation’s
community bankers informed of the latest and most important news on agriculture policy.