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Farm Bill Pressure Points
I. Farm Bill Pressure Points
II. Ethanol- “This is Not a Bubble…”
III. Farmer / Environmental Alliance
I. Farm Bill Pressure Points
Dow Jones writer Bill Tomson reported yesterday that, “The Bush administration says major reform is needed for government farm subsidies, setting the stage for confrontation with those seeking to prolong the status quo when Congress gets to work in 2007 to craft the next multi-year farm bill.
“Issues such as federal investment to support the expansion of corn and other bio-based ethanol production and increase conservation programs, on the other hand, are widely agreed on.
“There is just too much international pressure to reform, U.S. Department of Agriculture officials say, to leave in place subsidies that may violate World Trade Organization rules.
“But groups such as the American Farm Bureau Federation [A.F.B.F.] say if WTO members want to take more legal action, bring it on.”
Mr. Tomson went on to note that, “The U.S. lost a legal battle to Brazil in the WTO over U.S. cotton subsidies and subsequently cut its step 2 program payments, but that doesn’t mean other subsidy programs need to be impacted, AFBF President Bob Stallman said recently. ‘Just because the cotton case ruling came out the way it did does not mean a challenge against rice or corn or soybean (subsidies) would come out in the same manner,’ he said.”
With respect to the budget, the Dow Jones article explained that, “The AFBF has predicted the Congressional Budget Office will reduce its next ‘baseline’ guide for agricultural commodity program spending ‘to $57 billion over six years – barely more than half of the $99 billion Congress was willing to spend on commodity programs during the past six years.’
“The farm group said it was demanding that ‘funding for the upcoming farm bill should be at the same level as that authorized in the 2002 farm bill, with an inflation adjustment.’
“Johanns, in a December interview with Dow Jones Newswires, was critical of AFBF’s demands because they ignore current estimates showing farmers don’t need some subsidies because of strong commodity prices.”
The article also indicated that, “[House Agriculture Committee Chairman Collin Peterson] has said he has a plan he would like to incorporate into the 2007 farm bill that sets aside 5 million acres for the production of potential energy crops such as switchgrass. The idea, he said, is to pay farmers to grow the crops they wouldn’t otherwise grow to discover the best plants for ethanol production.”
The editorial board at the San Francisco Chronicle noted yesterday that, “In his first year in office, President Bush’s failure to veto a pork-heavy farm bill put his administration on the treacherous path of over-spending. Bush could have shown the GOP-led Congress early on that he had no patience for earmarks and would enforce fiscal discipline. Instead, he chose the easy route — spending more of other people’s money with the expectation that voters who benefit from subsidies would re-elect Republicans.”
The Chronicle added that, “Both Republican and Democrats have argued that the 2007 farm bill should widen the field of crops that qualify for payments, as it is not fair to use federal dollars to prop up wheat, but not carrots. As a Californian, [Speaker of the House Nancy Pelosi] has reason to support federal subsidies for fruits, nuts and veggies. The challenge to the new Congress will be to be fairer to a broader range of farmers without raising the tab to all taxpayers.
“Sen. Tom Harkin, D-Iowa, will chair the Agriculture Committee — which is good news for farmers who grow corn or other plants used for biofuels, if bad news for taxpayers. ‘Energy actually may be the engine that pulls this farm bill, or pushes it,’ he told the Associated Press.
“One man’s energy is another man’s pork. We support the Democrats’ determination to ‘reform’ farm spending, as long as their idea of reform actually cuts spending.”
II. Ethanol- “This is Not a Bubble…”
The Associated Press reported on Monday that, “Michigan corn growers are finding their fields turning to gold as prices rise rapidly because of the growth of ethanol production.
“Many farmers complained when rain kept them out of the fields and delayed the harvest.
“But the wait is paying off, as corn prices rose from $1.85 per bushel in August to $3.50 per bushel in October, the Kalamazoo Gazette reported Sunday.”
Photo by U.S.D.A.
The A.P. story went on to note that, “‘This is not a bubble, that’s the huge thing,’ said Allegan County Agriculture Extension agent Paul Wylie.
“The high prices and the driving force behind them represent ‘a sea change,’ Wylie said, and are creating a large-scale shift in agriculture that may be felt at every level of production and use.”
In addition, the article added that, “Gov. Jennifer Granholm this year established a 26-member Michigan Renewable Fuels Commission, a bipartisan panel of state officials, business leaders, farmers and university researchers to promote ethanol and other biofuels.
“Michigan ethanol plants, including those in planning or under construction, have the capacity to process 242 million bushels of corn, or 84 percent of the state’s current crop, Wylie said.
“That has farmers looking for more land for corn.
“‘The stars are lining up at this point,’ said Rod Stevenson, an area technology development manager with Monsanto Co., which develops and sells seed corn. ‘With the potential of five or six ethanol plants coming on in Michigan and heavy uses of biofuels across the country … corn will be the crop to produce in 2007,’ he said.
“One potential side effect: higher prices for meat and eggs.”
Raquel Rutledge, writing in the Milwaukee Journal Sentinel on Monday, reported that, “To Jim Casey, yellow is the color of money these days.
“Casey and other farmers said they haven’t seen anything like it in years: corn prices so high they don’t even get their government checks. Demand so high they’ve already sold much of their 2007 crop.
“When Greg Steele considers yellow these days, he thinks about surviving the future. The soaring price of corn is putting a financial squeeze on him and other dairy farmers who count on the grain to feed their cows.
“For Sarah Lloyd, it means a major headache. Corn is fueling an explosion in the production of ethanol, the 200-proof, colorless liquid that the country is counting on to help wean it from addiction to foreign oil. Ethanol plants are springing up across the state – and around the corner from Lloyd, causing her and other neighbors serious concern.”
The article also noted that, “As corn is put to work for ethanol, the federal government spends less on subsidies. And the savings are no small kernels: Corn subsidies are down from $9 billion last year to about $2 billion in 2006.”
An Associated Press article from Friday also noted that some residents are voicing concerns over the potential impact new ethanol plants could have on air quality.
“A state environmental official told southwestern Indiana residents worried that a proposed ethanol plant would foul the region’s air that the factory will not emit enough pollution to be considered a ‘major source,’” the A.P. story said.
“Despite those assurances, several people who attended Thursday’s public meeting about Abengoa Bioenergy’s air pollution permit remain worried that the plant would worsen air quality.”
Kara Laney, in an update posted last week at the “Trading Ideas” blog (A new blog from the International Food & Agricultural Trade Policy Council) provided a broader look at the biofuels issue within the context of world trade and the Doha Round of W.T.O. trade talks.
“The Doha Round and biofuels appear to be on opposite tracks. While world leaders still say they want to spur economic growth by liberalizing trade, the political will devoted to the negotiations has waned considerably over the past few years, finally sputtering to a stop in July. Over the same period of time, not only has enthusiasm for biofuels grown in the US and EU, but support for biofuels as an economic development tool has also taken off. Attending a conference on biofuels markets in Africa held in Cape Town, South Africa, in early December, I was struck that biofuels, at least in some circles, seem to have replaced trade liberalization as the vehicle for growth in the developing world.”
The “Trading Ideas” update went on to note that, “However, there are still many open questions as to whether biofuels can truly live up to this potential, as outlined in a recent IPC Discussion Paper, ‘Biofuels: Promises and Constraints.’ The paper raises salient questions, such as:
“* Will the competition between food crops and fuel crops increase food insecurity?
* Will companies invest in domestic processing facilities, or will biofuel feedstock be yet another raw commodity export from Africa, a development strategy that has not served its countries well so far?
* Even if investment capital is available for biofuels, will countries be able to utilize it? After all, the production of biofuels feedstock faces the same supply-side constraints (lack of transportation infrastructure, inadequate access to agricultural inputs, poor water management) that currently impede investment in agriculture in Africa today.”
The update also stated that, “A clear set of trading rules that transparently lay out the place of biofuels within the agriculture and energy sectors would better serve the investment and development interests of developing countries than expensive subsidies. Without trade liberalization, the export of biofuels or biofuel feedstock will be subject to the same debilitating obstacles that hamper agricultural development in Africa today.”
Meanwhile, Brownfield’s Bob Meyer reported yesterday that, “As the ethanol industry expands in the United States, some question whether we can produce enough corn to meet the demand for food, feed and fuel. Monsanto agronomist, Dan Zinck has no doubt. Zinck says today’s corn plant has the genetic potential to produce anywhere from 400 to 700 bushels per acre. So we are, in effect, only getting about 44% of the potential yield. So what’s happening to the other 56%? ‘We’re leaving yield in the field due to stress, and the stress could be water, it could be nitrogen, it could be insects, it could be disease, it could be too high a temperature, it could be a number of things, but all these stresses interact together to keep us from realizing better yield potential.’”
And Bloomberg writers Joe Carroll and Jeff Wilson reported yesterday that, “Soybean prices may be headed for the biggest jump in three decades as farmers plant more fields with corn.
“Growers in the U.S. are preparing to sow the fewest acres of soybeans in 10 years. At the same time, demand is rising, creating conditions that traders say may double this year’s average price of $5.98 a bushel and allow soybeans to replace corn as the best- performing farm commodity.
“‘The day of sub-$6 soybean prices is over,’ said Dan Basse, president of AgResource Co. in Chicago. ‘Demand is growing too fast for production to keep pace.’”
The article added that, “The shift in U.S. crops next year will be similar to 1976. Farmers that year increased the land used for corn by 7.5 percent to 84.59 million acres, and reduced soybeans by 7.9 percent. Grain supplies at the time shrank after two years of harsh weather and rising imports by the former Soviet Union.
“Before surging in 1976, the value of a bushel of soybeans in late 1975 was equal to 1.9 bushels of corn, down from a historical average the prior three decades of about 2.5. Twenty years later, that ratio dropped to 1.68 in June 1996, before a soybean rally that sent prices to a nine-year high in May 1997. Now, it takes 1.76 bushels of corn to buy one bushel of soybeans, less than in 1975.”
III. Farmer / Environmental Alliance
Jessica Kowal, writing in today’s New York Times, reported that, “The standoff here between farmers and environmentalists was familiar in the modern West.
“With salmon and wildlife dwindling in the Skagit River Delta, some environmentalists had argued since the 1980s that local farms should be turned back into wetlands. Farmers here feared that preachy outsiders would strip them of their land and heritage.
“This year, though, the standoff ended — at least for three longtime farmers in this fertile valley, who began collaborating with their former enemies to preserve wildlife and their livelihoods.”
The Times added that, “The Nature Conservancy, which usually buys land to shield it from development, is renting land from the three farmers on behalf of migrating Western sandpipers, black-bellied plovers, dunlins, marbled godwits and other shorebirds.
“From private and public funds, including a grant from the federal Environmental Protection Agency, the farmers, David Hedlin, Gail Thulen and Alan Mesman, will together receive up to $350,000 for three years of labor, expenses and the use of 210 acres, said Kevin Morse, the Skagit Delta project manager for the conservancy.”
-Keith Good
