Corn prices, driven down by EPA and good weather, come to farm bill fore

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, November 20, 2013

There’s a new factor making its way into ongoing farm bill discussions: the falling price of corn.

Friendlier weather this year in the Midwest, the Agriculture Department’s recent rosy projections of a record corn crop, farmers taking lands out of conservation programs and higher yields of corn per acre this season have all contributed to the downward spiral in the price of corn over the past several weeks.

Last week’s proposal by the Obama administration to reduce next year’s ethanol mandate has brought the corn price into even sharper focus and lent a heightened importance to farm bill negotiations, the House’s agriculture leader said yesterday.

“There’s a sense of urgency amongst people who might have otherwise said, ‘I don’t need all of the various features; I might not even need a farm bill — I’m taken care of,'” said House Agriculture Chairman Frank Lucas (R-Okla.). “Now, suddenly, the price of corn comes down.

According to USDA data released Monday, the price of corn averaged $7.74 a bushel a year ago, largely because of the drought and, critics of the renewable fuel standard argue, the increased production of ethanol. On Monday, the price of corn was around $4.10 a bushel; USDA predicts that the average price of corn this year will be $4.50 a bushel.

Farmers who were well-off last year during the drought are now faced with the prospect of low corn prices for the coming weeks or months. Although the prices are higher than the $2-a-bushel price seen in farm country for most years between 1973 and 2006, the prices of inputs such as fertilizer and land have only continued to rise; a farm price of $4.25 a bushel is currently needed for corn growers to break even.

The increased supply and reduced demand have a rippling effect through the agricultural economy, given that corn is such a staple crop in the country.

“You eat it, you drink it, you burn it, you feed it. It’s an amazing product,” Lucas said. “When they go under pressure, it pulls everyone else down.”

Corn growers have slammed the decision by EPA last Friday to decrease the corn ethanol mandate next year by about 800 million gallons compared to this year, warning that it will drive the price down even further by creating a glut of corn in the market with no demand (E&ENews PM, Nov. 15).

“This recommendation is ill-advised and should be condemned by all consumers because it is damaging to our tenuous economy and shortsighted regarding the nation’s energy future,” said National Corn Growers Association President Martin Barbre.

For farm bill negotiations, EPA’s proposal and the various other factors driving down the price of corn mean that agricultural producers — including corn growers — are now facing uncertain economic times and more apt to support a robust safety net in the five-year legislation, Lucas predicted.

There’s a higher chance that the final farm bill conference report might overturn reforms that critics of farm subsidies have championed, including limits on the amount of payments that an individual farm can receive. Both the House version, H.R. 2642, and Senate version, S. 954, of the farm bill currently being negotiated by the 41-member bicameral conference committee contain a hard cap of $250,000 on farm payments to a farm. And both bills would close a loophole that allows large farms to collect higher payments.

“Get ready for another round of the litany of falsehoods from those forces wedded to keeping alive the current policy of no effective limits on subsidies per farm operation,” the National Sustainable Agriculture Coalition predicted Monday.

Along with affecting conversations on the commodity portion of the farm bill, EPA’s proposal Friday may provide a boost for rural energy programs, Senate Agriculture Chairwoman Debbie Stabenow (D-Mich.) said yesterday.

USDA partly uses the farm bill’s energy title to fund advanced biofuel projects across the country, and biofuel supporters may turn to it as their saving grace in the face of disappointment from the Obama administration.

“I think it makes it even more important to have a strong energy title because it’s going to be important that we continue to support the industry so that it doesn’t move backwards,” said Stabenow, who said she had spoken with EPA Administrator Gina McCarthy ahead of the proposed RFS targets last week to express her disappointment with the backtrack.

The next few weeks will be critical for the farm bill. Agriculture leaders hope to have some framework for an agreement by at least early next week and hope to have a final conference report on the House floor before the lower body leaves for the winter recess the morning of Dec. 13. The Senate would then take up the bill the following week.

But whether the farm bill, which Congress has worked on for more than three years, will actually be done by then is up in the air. There’s still a huge gap between the Senate version’s proposed $4 billion cut to the national food stamp program and the House’s proposed reduction of $39 billion.

“This is a body that tends to turn an hour into a day, a day into a week, a week into a month, a month into a year,” Lucas said. “This just needs to be done. The folks back home deserve certainty.”

He added: “I deserve to get off my Zantac — figuratively speaking.”