If payments for 2014, the first year the farm bill takes effect, do come in at that level — as some private economists have calculated — they would be more than 10 times the U.S. Department of Agriculture’s working estimate and more than double the forecast by the Congressional Budget Office.

Farmers will be in line for payouts if revenues fail to meet benchmarks tied to long-term price and production averages. Both USDA’s and the CBO’s estimates were made before crop prices tumbled this year on oversupply from a huge harvest.

The farm budget blowout for 2014 is unlikely to cause a furor in Washington, despite the clamor for cost-cutting among Republicans who now control Congress. The trillion-dollar farm bill took so long to enact because of controversy over some of its other major planks, including food stamps for low-income families, that lawmakers are loath to re-open it.

From Monday, farmers were able to start signing up for the compensation programs. Most participants will be the families who own and operate about 98 per cent of all U.S. farms, large and small.

“The (farm) bill actually did little to rein in costs,” said Republican Rep. Tom Petri of Wisconsin in an emailed statement. “What we’re seeing is a program that still costs far more than it should and fails to include reforms that actually save taxpayer dollars.”

The farm bill’s new programs were meant to cost the taxpayer less by replacing a nearly two-decade-old scheme of direct cash payments to farmers, which were about $5 billion a year and were made regardless of need (all figures US$).

But the payouts for 2014 now look likely to far exceed that amount.

Because of ample supplies, corn prices have fallen well below the long-term average price used as a benchmark for one of the new programs. Ironically, this year’s bumper harvest may not be large enough to compensate for those price falls and revenues for some farmers could be low enough to trigger payments.

“Crop insurance has drifted away from that basic safety net concept and the farm bill has taken it even farther away,” said analyst Craig Cox of The Environmental Working Group, a non-profit, non-partisan body that researches environmental health, food and agriculture.

“It’s going to be expensive”

In August, USDA forecast subsidies for the 2014 crop under the farm bill’s Agriculture Risk Coverage (ARC) and the Price Loss Coverage (PLC) programs would be $762 million, using $4.20 per bushel for corn as an average market price for 2014. It put average annual payments over the lifetime of the bill at $5.7 billion.

The CBO, forecasting in January before the farm bill became law, put the 2014 payment for both ARC and PLC at $3.8 billion and the average annual figure at about $2.3 billion.

As forecasts are based on several variables, including price and the amount of crop produced, estimates can change. The long-term average used as the benchmark also alters in coming years as it always reflects prices in the previous five years.

Corn futures on the Chicago market hit a five-year low of $3.18-1/4 per bushel in October and are now around $3.70 per bushel. USDA estimated in its monthly report on Nov. 10 that the price would be between $3.20 and $3.80 per bushel for the crop year that runs from Sept. 1, 2014.

Chris Hurt, professor of agricultural economics at Purdue University and a regular speaker at farm investment conferences, estimates support payments to the average Indiana farm using the farm bill’s formula and an average 2014 corn price of $3.40 a bushel would be around $70 an acre under the ARC program.

“It’s going to be expensive,” he said, adding Indiana would be fairly typical across the country, where about 85 million acres could be sown to corn. “That’s $6 billion for corn for 2014 alone. Maybe $8 billion to $10 billion is likely in the first year when you consider other crops,” he said.

Patrick Westhoff, director of the Food and Agriculture Policy Institute, said he calculated payments could reach $8 billion for the 2014 crop for ARC and PLC. Congress set up the institute to prepare forecasts for the agriculture sector.

USDA said it was too early to know what the actual cost of the farm bill payments would be this year.

USDA chief economist Joe Glauber conceded ARC payments could be high this year and next. But, “if prices remain low, those ARC guarantees will be potentially getting much, much smaller over time,” he told Reuters.

Farmers have until March to sign up for the new programs and must choose only one. Payouts for the 2014 crop will come next October and the average price for the year will be set then.

The program likely to be most popular is ARC, which calculates compensation based on a five-year average of national prices and county yields, less the high and the low. The PLC program uses a reference price, currently at $3.70 per bushel for corn.

— Ros Krasny and Christine Stebbins are Reuters correspondents in Washington and Chicago respectively.

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CBOT corn futures closed up 0.5 per cent on the bullishly construed data, with wheat futures also up 0.5 per cent. Soybean futures dropped 1.2 per cent on the projected larger crop.

The U.S. Department of Agriculture trimmed its corn crop estimate to 14.407 billion bushels from 14.475 billion in October, and lowered ending stocks to 2.008 billion bushels from 2.081 billion. Traders had leaned toward higher estimates.

“It was surprising to see the revision lower in corn production. The trade solidly felt an increase was due,” said Rich Nelson, chief strategist at Allendale Inc.

USDA’s fourth round of 2014 crop estimates mostly reflected fine tuning, though, with a hearty dose of harvested data to inform the agency’s estimates.

USDA estimated the U.S. soybean crop at a record 3.958 billion bushels, up less than one per cent from October and a hair below trade forecasts averaging 3.967 billion. The crop is inching closer to the once-unthought-of four billion-bushel mark.

Projected 2014-15 U.S. soybean ending stocks were steady on the month at 450 million bushels.

USDA raised its export and crush forecasts by a combined 30 million bushels to absorb the larger crop, a potential boon to major grain processors and exporters.

Darrel Good, agricultural market economist at the University of Illinois, said higher demand shown in the report should be constructive to prices over the long term.

“The big story this year will be that extremely large corn and soybean crops resulted in less than burdensome year ending stocks. The modest level of stocks relative to the consumption base opens the door for a tighter supply and consumption balance for the 2015-16 marketing year,” Good said in a blog post.

U.S. corn yields will be a record 173.4 bushels per acre, with 22 states expected to post new yield marks. Nov. 1 yield data shows the highest number of ears on record for the 10 primary growing states, USDA said.

Soybeans were also in great shape. Compared with final results for 2013, pod counts are up in eight of the 11 published states, USDA said. Fifteen states are heading toward record high soybean yields, including No. 1 producer Illinois.

Forecast U.S. wheat carryout was lowered by 10 million bushels, to 644 million, as a 30-million-bushel cut in stocks of hard red spring wheat more than offset an increase of 20 million bushels in hard red winter wheat stocks. USDA resurveyed some states’ wheat crops and lowered the 2014-15 U.S. wheat crop by 9 million bushels, to 2.026 billion.

— Ros Krasny is Reuters’ editor-in-chief for commodities, energy and companies news in Washington, D.C.

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The so-called Innate potato, developed by the J.R. Simplot Co., is engineered to contain less of a suspected human carcinogen that occurs when a conventional potato is fried, and is also less prone to bruising during transport.

Idaho-based Simplot is a major supplier of frozen French fries to fast food giant McDonald’s Corp.

Friday’s announcement came from the USDA’s Animal and Plant Health Inspection Service (APHIS). Simplot applied to APHIS for approval of the Innate potato in 2013. The submission was also reviewed by the Environmental Protection Agency and the Food and Drug Administration.

It was the first GM potato approved by APHIS that was not developed by Monsanto Co., which had a number of potatoes approved in 1995 through 1999 engineered to resist pests and disease.

Field trials of the Innate potato were conducted from 2009 through 2011 in eight states – Florida, Indiana, Idaho, Michigan, Nebraska, North Dakota, Washington and Wisconsin.

Genetic modification is common in U.S. field crops such as corn and soybeans. More than 90 percent of U.S. soybeans and about 89 percent of U.S. corn are genetically altered for herbicide tolerance or other traits.

But the potential adoption of genetic modification has been more controversial in food crops such as wheat, where no GM varieties are approved in the U.S., and for fruits and vegetables.

APHIS said it received hundreds of submissions from individuals or groups about Simplot’s potato during a public comment period.

Among those opposing the potato were individuals and groups broadly opposed to the development of GM crops in general, as well as to the regulatory framework surrounding genetic modification, APHIS said.

The potential for human benefits — a lower cancer risk for consumers — was among the positives cited in public comments.

— Ros Krasny is Reuters’ editor-in-chief for commodities, energy and companies news in Washington, D.C.

CORRECTION from Reuters, Nov. 10, 2014: An earlier version of this article incorrectly stated Innate was the first GMO potato approved for commercial planting in the U.S.

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USDA made surprise cuts to U.S. and global wheat ending stocks for 2014-15, pushing wheat futures up 1.2 per cent, while corn fell 2.5 per cent and soybeans eased one per cent.

Domestic wheat stocks at 654 million bushels reflected higher projected exports and feed usage.

At 14.475 billion bushels, the U.S. corn crop marginally trailed average estimates, as did projected yields and harvested acreage.

“It’s not ‘bullish,’ it’s just ‘not bearish.’ The USDA did make modest reductions in harvested area, and they didn’t ramp up the yields as much as expected,” said Charlie Sernatinger of ED+F Man Capital.

USDA estimated the U.S. soybean crop at 3.927 billion bushels, up 17 per cent on the year but below trade expectations averaging 3.976 billion.

“If you take the numbers at face value, they’re somewhat supportive. The problem is everybody’s going to be expecting another revision higher in the November crop report,” said Jim Gerlach, president of A/C Trading.

At the start of this week, 74 per cent of corn and 73 per cent of soybeans were rated in good to excellent condition. Harvest has progressed at slightly slower than normal so far.

Overall corn yields will be a record 174.2 bushels per acre, with 22 states expected to post new yield marks.

Soybeans were also in great shape. Compared with final pod counts for 2013, pod counts are up in seven of the 11 published states, USDA said. Twelve states are heading toward record high soybean yields, including No. 1 producer Illinois.

Projected U.S. season-average prices for corn were lowered by 10 cents per bushel, to a midpoint of $3.40. Expected corn usage was nudged up by 50 million bushels on higher projected meat production.

Expected U.S. beef and pork production for 2015 were both raised. Pork output will nudge above beef output for the first time since 1952, a USDA official said.

“The big surprise”

USDA lowered its 2014-15 world wheat ending stocks forecast to 192.6 million tonnes, despite somewhat larger crops in the European Union, Pakistan and Ukraine.

Australia’s crop was lowered by 500,000 tonnes “on continued dryness in portions of the southeast,” and Argentina’s crop slipped 300,000 tonnes on overly wet conditions,

“They cut those (wheat) stocks quite a bit. That’s probably the big wake-up call in the report and that’s why we’re up 10 cents. That, to me, is the big surprise,” said Jack Scoville, analyst at Price Futures Group.

Corn production was cut for Ukraine, Belarus and Russia as harvested results showed the impact of hot, dry late-summer conditions, but was partially offset by larger EU and U.S. crops.

— Ros Krasny is Reuters’ editor-in-chief for commodities, energy and companies news in Washington, D.C. Additional reporting by Reuters’ Chicago commodities desk.

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In a blog post, the agency said researchers at North Carolina A+T State University have found a way to reduce peanut allergens by 98 to 100 per cent by focusing on certain proteins that can trigger food-related anaphylaxis, a severe, whole-body allergic reaction.

“We found that treating peanuts with protein-breaking enzymes reduced allergenic proteins,” said Dr. Jianmai Yu, a food and nutrition researcher at NC A+T’s School of Agriculture and Environmental Sciences.

The university has signed an agreement with Xemerge, a Toronto-based firm that commercializes emerging technologies in food and agriculture, to research the marketing potential of hypoallergenic peanut products.

“This is one of the best technologies in the food and nutrition space we have seen,” Johnny Rodrigues, chief commercialization officer of Xemerge, said on the university’s website. “It checks all the boxes: non-GMO (genetically modified), patented, human clinical data, does not change physical characteristics of the peanut.”

The treatment is effective whether peanuts are whole, broken into pieces or ground into flour, USDA said. It has also shown promise in wheat, one of the top eight food allergens in the U.S., and tree nuts.

USDA’s National Institute of Food and Agriculture supported the research with funding through an Agriculture and Food Research Initiative grant.

The process consists of pretreating shelled and skinless peanuts with a food-grade enzyme. This post-harvest process does not change the peanut’s shape or cause lipid oxidation — a key consideration when determining a product’s shelf life.

Researchers at the University of North Carolina at Chapel Hill’s School of Medicine performed skin-prick tests to validate the research results on human test subjects, USDA said.

“Peanuts are increasingly used in food products, which make it difficult for the allergic individuals to avoid accidental exposure. Therefore, it is very important for us to find a way to make peanuts less or non-allergenic,” Yu said.

Peanuts cause serious allergic reactions in about 0.9 per cent of the U.S. population, including about 400,000 school-age children.

Anaphylaxis symptoms can include difficulty breathing, low blood pressure, swelling of the tongue, eyes or face; stomach pain, nausea and vomiting; skin rashes, blisters, itching, inflammation, and pain; and in some cases death.

The average U.S. consumer eats more than six pounds of peanuts and peanut products each year, according to USDA, with more than half of that in the form of peanut butter. Peanuts consumed in candy and as snacks are also popular.

— Ros Krasny is a commodities correspondent for Reuters in Washington, D.C.

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The move “will allow the agency to trace contaminated ground beef back to its source more quickly, remove it from commerce, and find the root cause of the incident to prevent it from recurring,” said USDA’s Food Safety and Inspection Service (FSIS).

Under its new procedures, FSIS will conduct immediate investigations of businesses whose ground beef tests positive for E. coli O157:H7 during initial testing, and at suppliers that provided source materials.

In the past, FSIS began investigations at the grinding facility only after a presumptive positive test result was confirmed, which can take two days. Tracing E. coli outbreaks back to their source could have taken 30 days, USDA added.

“A critical component of preventing foodborne illness is quickly identifying sources of contamination and removing unsafe products from store shelves,” said Brian Ronholm, USDA’s deputy undersecretary for food safety.

The announcement comes a month after USDA proposed to require all makers of raw ground beef products to keep more detailed records, making it easier for retailers to trace the sources of their supplies.

The E. coli O157:H7 strain can cause severe abdominal cramps, bloody diarrhea and vomiting. In young children and the elderly a life-threatening form of kidney failure can develop. Exposure is linked to contaminated water or food, including raw vegetables and unpasteurized milk as well as undercooked ground beef.

USDA said “dozens more” ground beef recalls could occur once the new protections are fully in place, which is expected to be in mid-December.

– Ros Krasny is a commodities correspondent for Reuters in Washington, D.C.

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At 14.03 billion bushels, the estimated crop fell short of trade estimates averaging 14.25 billion, and forecast ending stocks of 1.8 billion bushels were also below forecasts.

USDA estimated the U.S. soybean crop at a record of 3.82 billion bushels, up 16 percent on the year and close to trade expectations, paving the way for ending stocks to more than triple in 2014/15 from the tightest in four decades.

At the start of this week 73 percent of corn and 71 percent of soybeans were rated in good to excellent condition, and development was moving ahead at a normal pace.

For now, most of the Corn Belt has ample moisture to support crop development in the final weeks of maturation.

Overall corn yields will be a record 167.4 bushels per acare, with 11 states expected to post new yield marks.

Aug. 1 data indicated the highest number of ears on record for the ten key corn producing states, USDA said.

Seven states are on pace for record high soybean yields, USDA said, including No. 1 producer Illinois.

U.S. wheat production was pegged at 2.029 billion bushels, up 2 percent on the month.

Projected U.S. season-average prices for wheat were lowered by 30 cents per bushel, for corn by 10 cents per bushel and for soybeans by 15 cents per bushel, reflecting the recent steady declines in market prices.

New-crop corn supplies will be a record 15.243 billion bushels, although USDA trimmed 2013/14 ending stocks based on higher ethanol use and exports. For the current year ethanol demand was 5.12 billion bushels, up 45 million on the month.

Russia, China wheat crops bigger

USDA nudged its 2014/15 world wheat endings stocks forecast to almost 193 million tonnes, above expectations. Russia’s wheat crop jumped by 6 million tonnes on the month and crisis-hit Ukraine’s crop rose by a projected 1 million tonnes, and the Chinese crop was up by 2 million.

“China and Russia imports are lowered 1 million tonnes and 500,000 tonnes, respectively, because of increased production,” USDA said.

The global coarse grain crop rose by some 6 million tonnes, mostly reflecting large corn crops in the United States and Europe, and increased barley output in the former Soviet Union.

India’s delayed monsoon knocked down its prospects for corn, sorghum and millet crops by a combined 2.7 million tonnes.

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The U.S. Department of Agriculture has proposed a change in regulations that would relax restrictions on pork imports from certain areas of Mexico, potentially allowing for increased U.S. imports at a time of a supply shortage.

The proposal would permit pork to be imported from certain parts of Mexico defined as having a low risk of classical swine fever (CSF), the USDA’s Animal and Plant Health Inspection Service (APHIS) said in a posting on Tuesday in the Federal Register.

CSF, also known as hog cholera, is a highly contagious viral disease of swine that was eradicated in the United States in 1978 after a 16-year campaign.

Swine typically cannot enter the United States from regions affected by CSF. The most common method of transmission is through direct contact between healthy swine and infected animals.

Under the proposal, pork and pork products would have to be derived from swine raised on farms meeting stringent sanitary and biosecurity requirements, and the facilities would be subject to periodic inspections by U.S. authorities.

The USDA said it would provide safeguards against commingling of products from the designated safe areas with those that do not meet the proposed requirements.

The APHIS currently recognizes nine Mexican states as free of CSF: Baja California, Baja California Sur, Campeche, Chihuahua, Nayarit, Quintana Roo, Sinaloa, Sonora and Yucatan.

The new rule would incorporate the additional states of Aguascalientes, Colima, Guanajuato, Jalisco, Michoacán, Querétaro, San Luis Potosí and Zacatecas into a zone showing a low risk for CSF, and from which exports could be allowed under certain conditions.

The USDA said it did not expect any increase in supplies from Mexico to significantly affect U.S. markets.

The annual value of U.S. pork and pork product production averaged almost $15.9 billion from 2010 through 2012. The annual value of U.S. imports of pork and pork products from Mexico over the same period averaged about $31 million, or less than 0.3 per cent of U.S. domestic supply.

The United States imported 15.755 million pounds of pork from Mexico last year, versus 16.879 million in 2012. From January to May of this year imports totaled 7.943 million pounds.

Even so, additional supplies from Mexico could somewhat alleviate a pork shortage in the United States following the death of more than seven million piglets from a killer virus over the past year.

The USDA last Friday forecast retail pork prices would rise 5.5 per cent to 6.5 per cent in 2014. Through June prices were up 10 per cent.

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As many as 70 per cent of Florida’s citrus trees are believed to be infected by citrus greening disease, or huanglongbing, which is caused by bacteria deposited on trees by an insect called the Asian citrus psyllid.

“The citrus industry and the thousands of jobs it supports are depending on groundbreaking research to neutralize this threat,” U.S. Agriculture Secretary Tom Vilsack said in a statement.

In a monthly report on Wednesday USDA showed sharp cuts to Florida’s projected output of various citrus fruits, including oranges, grapefruit and tangelos.

The state’s 2013-14 orange crop is now forecast at 104.3 million boxes, down 21.5 per cent from 133 million in 2012-13. As recently as November it was expected to be 125 million boxes.

Florida produces over 60 per cent of the U.S. orange crop. Its struggles pushed orange juice prices to their highest levels in more than two years this spring, and prices are still up about 19 per cent for 2014 to date.

The funding from USDA will include $25 million for research and Co-operative Extension Service projects, and another $6.5 million for projects under the wing of a multiagency coordination group set up earlier this year (all figures US$).

Greening is considered one of the most serious citrus diseases in the world and has been found in several countries in Asia, Africa, the Indian subcontinent and the Arabian Peninsula after being discovered in Brazil a decade ago.

Affected trees may show twig dieback, causing reduced productivity within a few years, and fruit can fail to color properly, be misshapen and have a bitter taste.

State authorities first found HLB in south Florida in 2005. Since then it has occurred in all counties with commercial citrus production.

The University of Florida’s Institute of Food and Agricultural Sciences estimates lost revenues to the state since 2006 at $4.5 billion.

– Ros Krasny is Reuters’ editor-in-chief for commodities and energy news in Washington, D.C. Additional reporting for Reuters by Barbara Liston in Orlando.

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Meanwhile, although the U.S. wheat crop is struggling, global supplies are on the rise.

“I didn’t see anything friendly in the reports. We are looking at huge world carryouts and with the current weather in the United States, there is no reason that the carryout can’t move significantly higher,” said Mark Gold, managing partner at Top Third Ag Marketing.

U.S. winter wheat production for 2014 will be down 10 per cent from a year ago at 1.38 billion bushels, and was cut another two per cent from May.

USDA lowered its hard red winter wheat crop estimate but raised its forecast for soft red winter wheat, the variety traded in Chicago. The SRW crop will still be down 20 per cent on the year.

The all-wheat crop of 1.942 billion compares with a trade estimate of 1.964 billion and is down nine per cent on the year, hurt by poor conditions in the southern and central Plains and the Pacific Northwest.

“We have plenty of world wheat… When you’re the only one with significant production loss, it’s difficult to remain competitive in the world market,” said Shawn McCambridge, analyst at Jefferies Bache.

Global wheat supplies for 2014-15 were raised by 4.1 million tonnes, and projected ending stocks also rose. Crop estimates were raised for China, Russia, India and the EU.

“Russia going up one million tonnes on wheat production was a big surprise to me,” said Mark Zuzolo at Global Commodity Analytics.

Soybean supply squeaker

Domestic soybean stocks will dwindle to a roughly two-week supply ahead of a forecast record large crop and a spike in 2014-15 ending stocks.

USDA trimmed its 2013-14 soybean ending stocks forecast by five million bushels based on a higher crush. Record high imports will help U.S. soybean crushers limp through to harvest.

Forecasts for old- and new-crop corn ending stocks were unchanged on Wednesday at 1.146 billion bushels and 1.726 billion bushels respectively.

USDA will make its first survey-based production forecasts for corn and soybeans in August. Weekly updates show both crops in strong shape despite a late start to planting, suggesting high yields could be on the way.

“Conditions in the most recent crop progress report are the best in four years for the aggregated 18 reported states, and better than any time since 2007 for the Corn Belt,” USDA said.

World corn and coarse grain stocks are also on the rise. USDA increased its 2013-14 corn production estimates for Brazil and India.

“There’s certainly nothing here for the bulls to hang on to,” said Rich Feltes, vice-president of commodity research at R. J. O’Brien.

— Ros Krasny is Reuters’ editor-in-chief for commodities and energy news in Washington, D.C.

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