Rich Pottorff, Doane chief economist & Washington analyst  |   February 11, 2013 resize text

The imposition of the automatic spending cuts (the sequester) is now less than a month away, and there are few signs of compromise between the Administration and Congress.

If there is no deal to avoid the sequester, farm program spending would be cut. But how much and where are still unclear.

USDA would have to cut nearly $2.47 billion over the last six months of the fiscal year. A report from the Office of Management and Budget released last fall shows cuts in mandatory spending would total about $469 million this fiscal year, with a significant part of that coming out of direct payments.

There would be $289 million cut from conservation programs, but USDA would honor in-force contracts, such as the Conservation Reserve Program. School lunches and the food stamp programs would be exempt from the cuts, but funding for the Women, Infants and Children program (WIC) would fall by $543 million.

Almost all USDA programs would see some cuts in funding.

U.S. debt will continue rising over the next ten years even as the economy recovers and unemployment falls, according to the Congressional Budget Office (CBO).  In the annual forecast the CBO says the debt will be equal to 77 percent of GDP by 2023, compared to the 40-year average of 39 percent.

The amount of money the government has to pay for interest alone on the national debt will more than double over the next decade.

(The CBO baseline uses assumptions that current laws remain in place for the 10-year forecast horizon.)

The CBO also released their baseline for agriculture for the next decade.

The forecast is based on a continuation of current ag policy and Congress uses the baseline to estimate changes in program costs under alternative provisions. The baseline shows spending on commodity programs up 15 percent in fiscal 2013. CCC program costs hold about steady through the 10-year forecast period, but conservation program costs rise by about 35 percent.

Crop insurance program costs hold steady at between $8 billion and $9 billion per year. CBO’s corn acreage forecast for 2013 is 97 million acres, down 200,000 each for corn and soybeans, 1.3 million for wheat, respectively.

A bill that would eliminate a permit requirement for applications of pesticides has been introduced by Senators Mike Johanns, R-Neb., and Pat Roberts, R-Kan. A 2009 Court of Appeals ruling required the pesticide applications to be by permit only under the Clean Water Act.

The system is called the National Pollutant Discharge Elimination System (NPDES). The system requires approximately 35,000 pesticide applicators to get permits covering about 500,000 applications per year.

(The same bill was introduced in the last Congress but it was never brought up for consideration on the Senate floor.)

Just as Japan eased import restrictions on U.S. beef, Russia announced a ban on imports of all U.S. beef and pork unless USDA agrees to certify that the products are free of traces of ractopamine. (Ractopamine is a feed additive

that promotes leanness and the international food safety organization has

ruled that meats produced using the additive are safe for human consumption.) So far, USDA has said it will not comply with Russia’s demands. Russia is a key buyer of U.S. beef and pork, with combined shipments valued at more

than $500 million per year.

Last week a court ruled that EPA set the 2012 mandate for cellulosic ethanol too high in an effort to boost the industry. The mandate for last year was set at 8.7 million gallons, far more than was produced. However, almost as soon as the court ruling was reported, EPA set the cellulosic ethanol mandate for 2013 at 14 million gallons. There is growing momentum in Congress to reevaluate the Renewable Fuels Standard mandates. Changes are far from certain, but they are more likely now than they were at this time last year.

End of an era at the Kansas City Board of Trade. CME Group, Inc. plans to close the Trading pits of the KCBT in late June as part of the futures-exchange giant’s 2012 acquisition of that regional exchange. The shift signals an end to nearly 160 Years of trading HRW wheat futures in KC.

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