A U.S. Department of Agriculture news release from yesterday stated that, “Driven by growing ethanol demand, U.S. farmers intend to plant 15 percent more corn acres in 2007, according to the Prospective Plantings report released today by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS). Producers plan to plant 90.5 million acres of corn, the largest area since 1944 and 12.1 million acres more than in 2006.

I. Prospective Plantings
II. Farm Bill Related Reports

I. Prospective Plantings

A U.S. Department of Agriculture news release from yesterday stated that, “Driven by growing ethanol demand, U.S. farmers intend to plant 15 percent more corn acres in 2007, according to the Prospective Plantings report released today [full report] by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS). Producers plan to plant 90.5 million acres of corn, the largest area since 1944 and 12.1 million acres more than in 2006.

“Expected corn acreage is up in nearly all states, due to favorable prices fueled by increased demand from ethanol producers as well as strong export sales. Illinois farmers intend to plant a record 12.9 million corn acres this spring, up 1.6 million acres – or 14.2 percent – from 2006. Record-high acreage is also expected in Minnesota, North Dakota, California and Idaho. Iowa continues to be the largest corn acreage state with 13.9 million acres, up 1.3 million acres – or 10.3 percent – from 2006.

“The increase in intended corn acres is partially offset by a decrease in soybean acres in the Corn Belt and Great Plains, as well as fewer expected acres of cotton and rice in the Delta and Southeast. U.S. farmers plan to plant 67.1 million acres of soybeans, the lowest total since 1996 and a decrease of 8.4 million acres – or 11 percent – from 2006. Area planted to cotton is expected to total 12.1 million acres, down 20 percent from 2006.”

For a complete analysis of the Prospective Plantings report, including implications, listen to this University of Illinois Extension interview (MP3) with University of Illinois Agricultural Economist Darrel Good, which was posted yesterday morning.

Reuters writer Charles Abbott reported yesterday that, “U.S. farmers plan to cash in on the ethanol fuel boom by planting the largest area to corn in 63 years, potentially yielding a record crop and calming fears that renewable fuels will steal grain needed for food and feed, the federal government said on Friday.

“Even with record output, this year’s corn crop could sell for a record $3.50-$3.60 a bushel at the farm gate, market watchers said. Corn prices have doubled since last fall due to explosive growth of the ethanol industry, driving up costs for cattle, dairy, hog and poultry producers.

“Based on a survey of 86,000 farmers earlier this month, the Agriculture Department projected corn(maize) plantings of 90.454 million acres, which would be the largest acreage since 1944.”

Mr. Abbott indicated that, “Growers told USDA they will cut back on soybeans in the Midwest and on cotton and rice in the South to sow more corn.”

New York Times writer, Andrew Martin reported in today’s paper that, “But intentions do not always translate into reality. Many analysts were cautioning yesterday that it was too soon to assume there would be a bumper crop.

“Some farmers may change their minds about planting corn, especially after corn futures dropped on news of the planting report, though prices remain strong. The analysts, however, were worried about the weather.”

The Times indicated that, “But news of a record corn planting did not please everyone. Ken Cook, president of the Environmental Working Group, an environmental advocacy group, said the report should serve as a warning to Congress on the consequences of an ethanol boom, which include increased water pollution from fertilizer. Corn requires heavier applications of nitrogen fertilizer than any other crop.

“‘Up until now, ethanol policy has been little more than a political bidding war,’ Mr. Cook said in a statement. ‘Policy makers are outdoing one another to propose the biggest, fastest expansion of subsidies, and the most aggressive federal mandate to produce more ethanol and put more of it in our gas-guzzling automobile fleet.’”

Associated Press writers Nafeesa Syeed and David Pitt reported yesterday that, “Bob Ray, a senior vice president at the Chicago Board of Trade, said predictions that corn prices will continue to decline because of plentiful supply from a huge harvest must be balanced with increasing demand from the export market.

“Both China and India have sent signals recently that they’ll import significant amounts of U.S. corn. The Chinese can’t raise enough corn to feed their rapidly growing livestock market and India has recently lowered tariffs, indicating plans to import grains from the United States.

“A wild card also could be the European Union, which also has to meet required renewable fuel mandates and doesn’t have enough land available to set aside for grains to make into ethanol.”

Kevin Morrison, writing in today’s Financial Times, reported that, “Cotton planting in the US is expected to fall to its lowest level since 1989.

“The move also brings the food-versus-fuel debate further into focus, as more arable land in the US is used for fuel crops than for food at a time when global food demand is growing due to increased wealth and rising populations.

“Grain analysts said the reduction in soybean growing could lead to falling stockpiles, which could push up prices and result in livestock farmers paying more for animal feed made from soybeans.

“It also puts more pressure on Brazilian and Argentine soy farmers to increase production to fill the void in export markets likely to be left by the US.”

Nancy Cole reported in today’s Arkansas Democrat Gazette that, “Arkansas farmers plan to increase the number of acres they plant this spring in corn and grain sorghum by 195 percent and 217 percent, respectively, according to a report issued Friday by the U. S. Department of Agriculture’s National Agricultural Statistics Service.

“Meanwhile, acreage for all three of the state’s major row crops is expected to decline: cotton, down 29 percent; rice, down 13 percent; and soybeans, down 7 percent.”

The article also noted that, “Rice acreage also is expected to decline, dropping nationwide by 7 percent to 2. 64 million acres, and — in Arkansas — by 13 percent to 1. 22 million acres. If realized, such a drop in Arkansas would mean the smallest acreage since 1996, when 1. 18 million acres were sown.”

Bill Hord reported in today’s Omaha World-Herald that, “In Nebraska, the projected 9 million acres of corn would be the most planted since 1936. In Iowa, the 13.9 million acres of corn projected by the USDA annual planting intentions survey would be the most since 1985.

“‘At this level of production, corn producers can satisfy all the needs when you look at food, feed and fuel,’ said Don Hutchens, executive director of the Nebraska Corn Board.”

Jim Downing noted in today’s Sacramento Bee that, “Matching a national trend, California farmers plan to sow nearly 20 percent more corn this year than last, an increase of 100,000 acres and a state record. But unlike in the rest of the country, most of the new plantings here are driven by the need to feed cattle, not ethanol refineries.”

The article explained that, “Though a powerhouse in many crops, California is a minor corn producer, accounting for about 0.7 percent — 620,000 acres — of the national acreage this year.

“But the price of corn still matters to the state’s farm industry, because it is used to feed millions of cattle and chickens here. California’s nation-leading dairy industry sold $5.3 billion in milk in 2005. Dairy producers who depend on rail cars of corn from the Midwest have complained for months about the impact of the ethanol boom on their industry.”

Lauren Etter and Bill Tomson reported in today’s Wall Street Journal that, “Outside the U.S., countries are also responding to market signals by planting more corn. In Brazil and Argentina, corn acreage is expected to expand, which could put downward pressure on prices.

“Meanwhile companies that produce agricultural products, like fertilizer and other chemicals, could see their stocks soar over the season as demand for these products increases. Also for seed companies, a big corn crop is good news. Already DuPont Co.’s Pioneer Hi-Bred International unit — one of the nation’s largest suppliers of corn seed — is sold out of its best corn hybrid seeds.”

Debbie Carlson, writing at Barron’s Online, indicated that, “The grain industry was expecting a hike in corn acreage this spring, but this was about 2 million acres more than expected. Chicago Board of Trade corn prices swooned Friday, falling to their daily exchange-imposed price limit of 20 cents. The May contract ended the session at $3.7450 a bushel, a drop of 28.75 cents on the week.

“The sharp fall in prices doesn’t mean the bull market for corn is over, however. Prices could decline for several sessions, but they already are off their February highs — by 16.6% for the May contract and 10.8% for the December contract (which represents the fall harvest).

“Just because farmers tell Uncle Sam they intend to plant wall-to-wall corn doesn’t mean it’s going to happen. By June 30, when the USDA will ask what they actually planted, that carpet could more closely resemble an area rug.”

Chris Clayton reported yesterday at DTNAg.com that, “With USDA’s greater-than-expected corn acreage estimate Friday, Secretary of Agriculture Mike Johanns felt comfortable that there would be less pressure to find more crop acres through early opt-out of the Conservation Reserve Program.

“The secretary waited Friday until the grain markets closed to announce there would be no penalty-free early release for landowners with CRP contracts.

“Johanns said in an interview with DTN Friday afternoon that the Prospective Plantings report was one of the ‘last pieces of information’ he was waiting to review before deciding on whether to make the ‘very, very unusual move’ of a CRP opt-out. With corn acres ballooning to a projected 90.5 million, that made it easier to not make the offer.

“‘I really was waiting for this intentions report and feel like I was handed a very valuable piece of information this morning,’ Johanns said.”

II. Farm Bill Related Reports

USDA’s Economic Research Service (ERS) has provided a new webpage resource, “Farm Bill Issues: ERS Research and Analysis.”

According to the page, “Agricultural policy affects not only the economic well-being of farm households, but also our food supply, the environment, and the future of rural communities. The current farm law (the Farm Security and Rural Investment Act of 2002) remains in force only through 2007. The agriculture committees in Congress have begun to debate ideas and, in the upcoming months, will be crafting legislation that will become the next farm law. ERS analysts examine the economic effects of current farm legislation on producers, consumers, taxpayers, and rural communities, and evaluate potential effects of alternative policies and programs. Included in this feature is a selection of recent ERS research and analysis on issues that the farm bill debate will address.”

The page features sections on commodity programs, conservation, trade, nutrition programs, rural development, agricultural research, energy, as well as helpful links regarding specific Farm Bill provisions.

At the page, readers can also sign up for e-mail notices of new farm bill-related research and analysis.

Meanwhile, ERS has published two important reports, the “Feed Grains Backgrounder,” by Linwood Hoffman, Allen Baker, Linda Foreman, and C. Edwin Young; and the “Cotton Backgrounder,” by Leslie Meyer, Stephen MacDonald, and Linda Foreman, which provide excellent background and perspective regarding the feed grain and cotton sectors of the agricultural economy.

A summary of the “Feed Grains Backgrounder” noted that, “The U.S. feed grain sector, largest of the major U.S. field crops, faces unprecedented demand conditions. The size and speed of the expanding use of corn by the ethanol industry is raising widespread issues throughout U.S. agriculture. Debate is ongoing over the use of grain for fuel instead of for food or feed and the adequacy of future grain supplies. Increased productivity (yield) and additional area from land planted to competing crops, land enrolled in conservation programs, or idled land is expected to provide an increased supply of feed grains. The outlook is for higher feed grain prices, in part, as a result of renewable energy policies and high energy prices, with feed grain prices rising above farm program support levels. During the ongoing farm policy debate, the U.S. feed grain sector faces uncertainty about the future level and type of government support.”

A summary of the “Cotton Backgrounder” indicated that, “U.S. cotton growers, like producers of other agricultural commodities in recent years, have confronted pressures from market forces and the impacts of policy developments, both domestic and international. Most notably, the ending of the Multifiber Arrangement (MFA) sent a ripple effect throughout the global cotton industry. While adjustments in the textile and apparel sectors of many countries, including the United States, continue to evolve, dramatic changes have already been seen for some. World cotton mill use has accelerated along with economic growth since 1999, particularly in China, and U.S. cotton producers have benefited as foreign import demand has reached new heights. Government payments contribute a considerable portion of total revenue to the cotton sector, and adjustments to this program or any other commodity program in the 2007 farm legislation will be driven by factors such as domestic market conditions, multilateral trade negotiations, and the Federal budget deficit.”

In addition to ERS research, the Center for Agricultural and Rural Development at Iowa State University has also published important research relating to the 2007 Farm Bill.

“Adoption Subsidies and Environmental Impacts of Alternative Energy Crops,” which was written by Bruce A. Babcock, Philip W. Gassman, Manoj Jha, Catherine L. Kling, provides “estimates of the costs associated with inducing substantial conversion of land from production of traditional crops to switchgrass. Higher traditional crop prices due to increased demand for corn from the ethanol industry has increased the relative advantage that row crops have over switchgrass. Results indicate that farmers will convert to switchgrass production only with significant conversion subsidies. To examine potential environmental consequences of conversion, we investigate three stylized landscape usage scenarios, one with an entire conversion of a watershed to switchgrass production, a second with the entire watershed planted to continuous corn under a 50% removal rate of the biomass, and a third scenario that places switchgrass on the most erodible land in the watershed and places continuous corn on the least erodible. For each of these illustrative scenarios, the watershed-scale Soil and Water Assessment Tool (SWAT) hydrological model (Arnold et al., 1998; Arnold and Forher, 2005) is used to evaluate the effect of these landscape uses on sediment and nutrient loadings in the Maquoketa Watershedin eastern Iowa.”

The full report is available here.

-Keith Good

Demand for renewable energy, primarily corn-based ethanol, has played a leading role in the tight budget situation facing the Agriculture Committees. As the market price for corn and other program crops has increased, the projected amount of future price-triggered federal payments has significantly narrowed. However, ethanol’s influence will go far beyond the federal budget and will likely have a variety of ripple impacts throughout the agricultural economy.

I. Spending Measures
II. Ethanol-Lula in Today’s Post
III. Doha

I. Spending Measures

Congressional Quarterly reported yesterday that, “The Senate passed a roughly $123 billion supplemental war spending bill today by a 51-47 vote, paving the way for what lawmakers hope will be a speedy conference.”

Carl Hulse and Jeff Zeleny indicated in today’s New York Times that, “[Senate Majority Leader Harry Reid (D-NV)] promised that negotiators would quickly begin to reconcile the new Senate measure with a version passed by the House last week and have a bill ready to be approved and sent to the president soon after the House returns from its spring break on April 16. The administration has said the military needs the money by April 15, and the White House said Thursday that the Pentagon was already having to juggle accounts, shifting money from one program to another to buy more vehicles better able to withstand mines.

“Dana Perino, the deputy White House spokeswoman, said, ‘This, again, underscores the need to get the show on the road, get the bill to the president, he will veto it, and then, we’ll take it from there.’”

Thomas Schatz, penned an Op-Ed regarding the details of the war supplemental, which was published in today’s New York Times.

The opinion item noted that, “Emergency spending bills are called ‘Christmas trees,’ for the unrelated ‘ornaments’ that are added by members of Congress. (They are exempt from budget rules and are almost never vetoed, making them magnets for pork.) The nickname is usually not literal, but the Senate’s version of the fiscal 2007 supplemental appropriations bill that passed yesterday includes, among scores of other nonessential items, money for Christmas-tree growers.”

The Op-Ed included this chart, which contained a breakdown of all of the non-war related spending measures contained in both the Senate and House versions of the war supplemental.

Faith Bremner, writing in yesterday’s Argus Leader (South Dakota), reported that, “South Dakota Sen. John Thune will vote against the Iraq War spending bill today and in the process will vote against millions of dollars in aid for his state’s drought-stricken farmers and ranchers.

“The $122 billion spending bill, which President Bush has promised to veto, includes $3.7 billion in disaster aid for the nation’s farmers and ranchers. Agricultural producers have been trying for two years to win congressional approval for the assistance.

“Thune, a Republican, supports the disaster aid but opposes a provision in the bill that would set a March 2008 goal for bringing most U.S. troops home from Iraq. He and 47 other lawmakers, mostly Republican, tried but failed to remove the deadline language from the bill Tuesday.”

The article added that, “The spending bill is the agriculture community’s best hope for getting disaster relief anytime soon, said Mike Held, administrative director of the South Dakota Farm Bureau. Democrats tacked disaster assistance and other popular spending proposals onto the bill to win over wavering senators, a tactic Republicans also employed when they ran Congress.”

Meanwhile, in the House of Representatives, Lori Montgomery reported in today’s Washington Post that, “Democrats marshaled a $2.9 trillion budget blueprint through the House yesterday, uniting a diverse coalition behind a spending plan that would increase funds for education, health care and veterans’ services while aiming to erase the federal deficit within five years.

“To balance the budget, the proposal would permit President Bush’s signature tax cuts to expire on schedule in 2010, prompting Republicans to accuse the new congressional majority of plotting a massive tax increase. Those charges helped persuade a dozen Democrats, including several freshmen from conservative districts, to reject the blueprint, which was approved on a vote of 216 to 210.”

With respect to agricultural spending in the House budget plan, Reuters news reported yesterday that, “House Democrats may use offsets to cover the use of a $20 billion reserve fund for new agricultural spending while a new farm bill is written, the head of the House Agriculture Committee said on Thursday.

“Lawmakers would be able to dip into the $20 billion reserve, but would have to take funds from other programs or find new federal revenue.

“‘We haven’t identified anything specific, but we have got an indication that there is fairly broad-based support on a bipartisan basis to try to figure out a way to accomplish that,’ Rep. Collin Peterson, chairman of the House Agriculture Committee, told reporters.

“The Minnesota Democrat said lawmakers agree more funding needs to go toward conservation, rural development, fruits and vegetable and renewable fuels and feed stocks.”

The article also explained that, “The House and Senate have a goal of agreeing by April 15 on a spending plan. The House approved its budget blueprint, with the $20 billion reserve for agriculture through fiscal 2012, on a 216-210 vote on Thursday. The Senate passed its budget resolution last week, allowing a $15 billion reserve fund for agriculture over five years.”

In order to secure an additional $15 to $20 billion above the allocated baseline for use in crafting the 2007 Farm Bill, the Agriculture Committees will have to find spending offsets or revenue enhancements to “pay for” the excess spending.

As the Washington Post editorial board explained in today’s paper (“Hello, Pay-Go”), “The House and Senate have now passed budget plans for next year. First the good news: The resolutions enshrine ‘pay-go,’ which is a procedural impediment to additional deficit spending. Pay-go means that more spending on things such as entitlement programs or tax cuts will have to be offset by either tax increases or spending cuts elsewhere. It’s an eminently responsible idea that should force Congress to make some tough but needed choices as it allocates cash over the coming months.”

As demand for resource allocations for “conservation, rural development, fruits and vegetable and renewable fuels and feed stocks” in the Farm Bill increases, it appears that lawmakers will have a difficult time finding “Pay-go” offsets, particularly because some commodity groups are also seeking additional funding for Title I farm subsidy measures.

***

Now that both the House and the Senate have passed a budget resolution and war supplemental bill, conferences between the two chambers can begin. Congressional Quarterly reported this morning that, “Conference negotiations on the budget resolution are expected to go quickly, while the supplemental negotiations will be more difficult but probably won’t drag out. Both chambers are heading out of town for a spring recess next week. The House will be gone for two weeks while the Senate takes a week respite.”

II. Ethanol

Demand for renewable energy, primarily corn-based ethanol, has played a leading role in the tight budget situation facing the Agriculture Committees. As the market price for corn and other program crops has increased, the projected amount of future price-triggered federal payments has significantly narrowed. However, ethanol’s influence will go far beyond the federal budget and will likely have a variety of ripple impacts throughout the agricultural economy.

A recent Congressional Research Service report, “Ethanol and Biofuels: Agriculture, Infrastructure, and Market Constraints Related to Expanded Production,” (by Brent D. Yacobucci and Randy Schnepf, March 16, 2007) which provided a comprehensive background on a variety of ethanol related issues, noted that, “Rapidly expanding corn-based ethanol production could have significant consequences for traditional U.S. agricultural crop production. As corn prices rise, so too does the incentive to expand corn production either by expanding onto more marginal soil environments or by altering the traditional corn-soybean rotation that dominates Corn Belt agriculture. This would crowd out other field crops, primarily soybeans, and other agricultural activities. Large-scale shifts in agricultural production activities will likely have important regional economic consequences that have yet to be fully explored or understood” (pages 4-5).

Amanda Paulson, writing earlier this week in the Christian Science Monitor, reported that, “In ethanol-happy Iowa, where presidential candidates are falling all over themselves to support the corn-based fuel additive and farmers are reveling in corn prices double those of a year ago, Joe Kerns sometimes hands out bumper stickers that read: ‘Ethanol: A complete waste of otherwise perfectly good corn.’

“It is not a popular opinion. ‘It’s tough to be the lonely voice out in the desert when there’s a party going on,’ acknowledges Mr. Kerns, director of purchasing for Iowa Select Farms, the state’s largest pork producer. ‘But I’ve had enough of [ethanol].’

“In the past six months, agriculture in America’s heartland has been turned on its head. Corn is selling at $4 a bushel, ethanol plants have turned around dying towns, and land values and rents are soaring. It’s a boom time for farmers who haven’t had a really good year in several decades, but not everyone is benefiting. Livestock producers like Kerns, for instance – who depend on cheap corn for their feed – are feeling the pinch.”

Ms. Paulson added that, “Agricultural economists and forecasters, meanwhile, are struggling to sort out the new dynamics. They debate whether the new fuel demands on corn are sustainable and what impact they might have on food supply.

“‘The whole world for agriculture here in Iowa and in the Midwest has changed,’ says Mike Duffy, an agricultural economist at Iowa State University. The effects vary widely for farmers, he says. ‘Depending on the point of view, I’ve heard ethanol described as the good, the bad, and the ugly.’”

A recent article posted at Unision.ie News (Ireland) stated that, “The development of the ethanol industry is the biggest shock to US agriculture since 1973 when Russia entered the grain market, a leading US agricultural policy expert told the forum.

“Bob Thompson from the University of Illinois said the booming ethanol industry would lead to a spike in food prices over the coming years.

“‘The price of meat, milk and eggs have to rise or farmers won’t produce them,’ he said. ‘Higher feed grain prices will reduce profitability of US livestock and poultry industries. Currently, US farmers and politicians are more enamoured with growth in ethanol and other biofuels than with exports and WTO negotiations.’”

Associated Press writer Genaro C. Armas reported today that, “Dairy economists predict the retail price of milk could rise as much as 30 cents per gallon _ a 9 percent jump _ by fall. The reasons include rising fuel and feed costs for farmers and increasing demand for milk products around the globe.

“The average retail price of whole milk could rise to $3.35 per gallon by October, up from $3.07 in January, said Ken Bailey, an agricultural economist at Penn State University who specializes in the dairy industry.”

The AP story added that, “Logan Bower, president of the Professional Dairy Managers of Pennsylvania, said costs for farmers have risen so much recently that he is unsure whether even the predicted price increases will help.

“Costs have surged for fuel and petroleum-based products and for the corn used to feed dairy cows, a side effect of increases in the production of ethanol.

“Bower said he now pays about $180 a ton to feed his 500 dairy cows, up from $115 a ton a year ago, an increase of more than 50 percent.”

Kevin Morrison and Doug Cameron, writing earlier this week at the Financial Times webpage, reported that, “Ethanol is expected to swallow one-quarter of US corn production this year and food producers warn of a ripple effect on global prices as grain-based animal feed prices increase and farmers grow more corn and less of other crops. This could force livestock farmers to reduce their herds, a move that would push meat prices up.

“The annual acreage report from the USDA, due on Friday [today], will be closely watched, with corn planting expected to show the biggest increase for more than a century, resulting in the largest area under cultivation since 1946.”

The FT article indicated that, “Dick Bond, chief executive of Tyson Foods, the world’s largest protein producer, has called on Washington to recognise the competing claims of the food and energy sectors when drawing up a proposed farm bill. ‘If left unaddressed, the bigger long-term issue will be the availability of US and global grain for protein and other foods,’ he warns.

“The USDA predicts that farm cash receipts will this year be 22 per cent above their average over the past decade. Yet [farmer Merlin Bartz] and others should not expect too much of a bonanza. After taking into account higher costs for fertiliser, feed and seeds, the department forecasts that farm expenses will be an even sharper 24 per cent above the 10-year average. That leaves American farmers sharing an aggregate income of $67bn (£34bn, €50bn), barely changed from 2006.”

Later, the FT article added that, “With the economics of ethanol and its environmental credentials still open to debate, and government policies subject to change, the longer-term outlook is unclear. Yet the emergence of bio­fuels has still transformed how banks and investors look at agriculture.

“Morgan Stanley and Goldman Sachs, the two largest commodity traders in the banking world, have started to expand their agricultural trading operations during the past 12 months, having spent the past two decades focusing on metals and hydrocarbons. Colin Bryce, head of fixed-income securities and commodities at Morgan Stanley, says the attraction of the sector stems not just from biofuels but also the financial services that banks can offer.”

A Dow Jones news article posted yesterday at the DTN Ethanol Center, reported that, “Legislation critical of the U.S. tariff on ethanol imports was introduced in the U.S. Senate this week, together with a call for a study on the effects of removing the trade barrier.

“Sen. Richard Lugar, R-Ind., called for the study as part a broader bill that would form a pact with Brazil in an effort to boost ethanol production and research in the Western Hemisphere.

“The bill criticizes the 54-cent-a-gallon tariff that U.S. ethanol industry representatives say is needed to boost a growing industry here.

“‘The United States government should work with foreign governments to remove trade barriers in energy,’ said the bill, titled ‘United-States - Brazil Energy Cooperation Pact of 2007.’”

To read a related press release issued by Sen. Lugar on this development, just click here.

Meanwhile, Brazilian President Luiz Inácio Lula da Silva penned an Op-Ed, which was published in today’s Washington Post.

In part, Lula noted that, “Tomorrow I will visit with President Bush at Camp David to follow up on conversations we had a few weeks ago in Sao Paulo. We have taken an important first step toward committing our countries to developing clean and renewable energy sources that will ensure the prosperity of our peoples while protecting the environment.”

The item noted that, “The agreement between Brazil and the United States provides for diversifying the production of biofuels through triangular alliances with third countries. This networking can include oil-producing countries interested in blending ethanol or biodiesel into their own fossil-fuel stocks. This is a recipe for increasing incomes, creating jobs and alleviating poverty among the many developing countries where biomass crops are abundant.

“For these proposals to gain traction, foundations for a worldwide market in these fuels must be put in place. Brazil and the United States joined India, China, South Africa and the European Union in launching the International Forum on Biofuels this month. Its goal is to ensure conditions for ethanol, and later biodiesel, to become globally marketed commodities. This will be achieved only if trade in biofuels is not hindered by protectionist policies. After all, the subsidies provided under America’s corn-based ethanol program have spurred an increase in U.S. cereal prices of about 80 percent. This hurts meat and soy processors worldwide and threatens global food security.”

III. Doha

Dow Jones writers Natasha Brereton and Paul Hannon reported yesterday that, “The U.S. and European Union may need to make further concessions on agricultural policy if the Doha trade round is to succeed, U.K. Chancellor of the Exchequer Gordon Brown said Thursday.

“‘The head of the World Trade Organization has finally brought together all the main parties that could contribute to a solution, but there is still this central issue that America and Europe will probably have to make a further concession on agricultural policy,’ in order to enable Brazil and other nations to also make concessions, Brown told the Treasury Committee.”

-Keith Good

A recent Congressional Research Service (CRS) report, “Farm Bill Proposals and Legislative Action in the 110th Congress” (March 22), provided an excellent overview of the important factors influencing the 2007 Farm Bill debate, as well as a summary and overview of “proposals by national organizations.”

On page two, the CRS set the stage for the FarmBill discussion by explaining that, “Rapid increases in the futures market prices of corn and other commodities since the summer of 2006 have contributed to a lower March 2007 baseline for farm program spending. Projected spending for government commodity payments under current law is projected to be $42.4 billion for the FY2008-FY2013 period, which is about $30 billion lower than actual spending in the previous six years. Baseline estimates for mandatory conservation and food stamps program for the next six years are higher compared to the previous six years. Funding for mandatory conservation programs under current law is estimated at $26.5 billion and food and nutrition assistance is estimated at $225.8 billion for FY2008-FY2013.”

In addition, the report noted that, “The House and Senate are in the process of completing an FY2008 budget resolution, which will determine budget parameters for the 2007 farm bill. By April 2007, both chambers are expected to complete action on the resolution, which will likely include a specific multi-year allocation to the Agriculture Committees for the new farm bill. Once given the new allocation, the Agriculture Committees will craft changes in policy to fit the new farm bill within the budget allocation. The Senate version of the FY2008 budget resolution (S.Con.Res. 21) contains a $15 billion reserve fund for the farm bill (above baseline) but would require the spending to be offset with reductions in other federal spending” (pages 2 and 3).

Although not included in the CRS report, the House version of the FY2008 budget resolution contains a $20 billion reserve fund for the Farm Bill, which under pay-as-you-go spending rules, would also require offsets.

Beyond the importance of budget considerations, the CRS indicated on page three that, “Initially, agreement in the Doha Round of multilateral trade negotiations was expected to converge in 2007 with the expiration of the 2002 farm bill, well before the expiration of Trade Promotion Authority (TPA), which provides for expedited congressional consideration of trade agreements. Many policymakers wanted a Doha Round agreement so that the next farm bill could be made consistent with new farm trade rules. However, progress on the Doha Round negotiations stalled in 2006. Now many in Congress are seeking to write a new farm bill without regard to any future Doha Round agreement. Nevertheless, this backdrop of negotiations and the potential for litigation could potentially influence the choices U.S. lawmakers have in designing new farm policies. EU officials have publicly stated that changes to U.S. domestic support programs suggested by the Bush Administration’s farm bill proposal do not go far enough in meeting Doha Round objectives for farm trade policy reform.”

After documenting Congressional hearing activity, theCRS report focused on the Administration’s 2007 Farm Bill proposal, and noted that, “For all areas in the farm bill, the Administration requests $5 billion more than the 10-year Office of Management and Budget (OMB) baseline, according to its own estimates. Commodity programs would receive $4.5 billion less than the $74 billion 10-year baseline, and conservation would receive $7.8 billion more than the $49 billion baseline. CBO estimates that these proposals would increase spending by $9.9 billion for the FY2008-FY2017 period relative to CBO’s March 2007 baseline budget. This is twice the Administration’s $5.0 billion estimate over the same 10- year period” (page 6).

Beginning on page seven, the CRS report then provided a recap of the following 2007 Farm Bill proposals, or positions (click on link for proposal or position detail).

* National Association of State Departments of Agriculture (brief overview on page seven of CRS report).

* National Farmers Union (Ibid at page seven).

* American Farm Bureau Federation (page eight).

* American Farmland Trust (page eight).

* National Corn Growers Association (page eight).

* National Association of Wheat Growers (page nine).

* National Milk Producers Federation (page nine).

* Specialty Crop Farm Bill Alliance (page nine).

* National Association of Conservation Districts (page nine).

* Defenders of Wildlife (page 10).

* Agriculture and Wildlife Working Group (Theodore Roosevelt Conservation Partnership) (page 10).

* Midwest Sustainable Agriculture Working Group / Sustainable Agriculture Coalition (page 11).

* Center for Rural Affairs (page 11).

* 25 x 25 Renewable Energy Alliance (page 12).

* Renewable Fuels Association (page 12).

* Chicago Council on Global Affairs (page 12).

* National Association of State Universities and Land-Grant Colleges (page 13).

* Institute for Agriculture and Trade Policy (page 13).

* Oxfam America (page 13).

The report then highlighted Congressional action beginning on page 14, noting that, “In the House, two comprehensive legislative proposals have been introduced that seek broad-based changes to existing farm legislation.”

* H.R. 1551, Healthy Farms, Foods, and Fuels Act of 2007 (page 14-15). HR 1551- Legislative Recap. Related Bills- S. 919.

* Equitable Agriculture Today for a Healthy America Act (EAT Healthy
Act); [press release] (page 15). H.R. 1600- Legislative Recap.

UPDATED May 8, 2007

* Cato Institute- “Freeing the Farm: A Farm Bill for All Americans,” by Sallie James and Daniel Griswold.

* American Farm Bureau Federation (AFBF)- “Farm Bill: An Investment That is Working.” Additional Information at this AFBF webpage- 2007 Farm Bill Proposal.

* The Farm, Nutrition, and Community Investment Act. H.R. 2144

UPDATED May 11, 2007

* The Food & Agriculture Risk Management for the 21st Century Act (FARM 21) – “Under this proposal, the current system of farm subsidies – counter-cyclical, loan deficiency, income loss, and direct payments – would gradually be transitioned to a more cost-effective and responsive system of farmer- held ‘risk management accounts’ (RMAs) and revenue insurance tools.”

Related Senate action: “New ag direction offered by Lugar and House colleagues.”

UPDATED May 17, 2007

* H.R.1766
Title: To amend conservation and biofuels programs of the Department of Agriculture to promote the compatible goals of economically viable agricultural production and reducing nutrient loads in the Chesapeake Bay and its tributaries by assisting agricultural producers to make beneficial, cost-effective changes to cropping systems, grazing management, and nutrient management associated with livestock and poultry production, crop production, bioenergy production, and other agricultural practices on agricultural land within the Chesapeake Bay watershed, and for other purposes.

***

Meanwhile, a news release from the House Ag Committee stated yesterday that, “Today the House Agriculture Subcommittee on General Farm Commodities and Risk Management held a hearing to review proposals to amend the commodity provisions of the 2002 Farm Bill. Congressman Bob Etheridge of North Carolina is Chairman of the Subcommittee.

“‘Today we heard in detail from major commodity groups about what their members would like to see in the next Farm Billand what they think of other proposals being offered,’ said Chairman Etheridge. ‘In general, the framework of the current farm safety net for program crops enjoys strong support in farm country. Given the declining budget baseline for farm programs, the Subcommittee will have to work in a bipartisan manner if we want to further build upon the strong fundamental structure of that is already in place.’”

The opening statements of all the witnesses are available here.

DTN reporter Chris Clayton noted in an article from yesterday that, “Lawmakers face a tight budget and must fit commodity programs in a framework of about $74 billion in spending or cut funds in other parts of the farm bill if they want more money for commodities. At the same time, many of the major program crop groups say they like the current farm programs — as long as there are changes made to increase the payments for their own commodities. That left the National Corn Growers Association out on an island, alone, with its plan to create a counter-cyclical program based on revenue.”

Mr. Clayton also included this summary in his article; “Some of the various proposals from groups include:

* The American Soybean Association [ASA] wants to raise the target price of soybeans above $5.80 a bushel. With a 44-cent per bushel direct payment, that means counter-cyclical payments are only paid when the price falls below $5.36 a bushel. The ASA wants the target price raised to $6.85 a bushel [related ASA press release].

* The National Association of Wheat Growers [NAWG] also wants a higher target price and increases to the direct payment program. The group wants to see the wheat prices increased to $1.19 a bushel and the target price increased to $5.29 a bushel [related NAWG press release].

* The National Cotton Council wants a ‘modest program’ that would pay U.S. mills some competitive assistance for every pound of cotton they consume.

* The National Corn Growers Association [NCGA] is seeking a revenue counter-cyclical program that would pay farmers when revenue falls below a county average, either due to lower yields or lower county prices. The plan would build on using crop insurance to cover much of the losses [related NCGA press release].

* The American Corn Growers Association is calling for the reestablishment of the non-recourse loan program to provide a floor price for the major, strategic commodities and ‘relieve the burden of tens of billions of dollars in subsidies from the shoulders of America’s taxpayers.’

* The USA Rice Federation wants to raise the loan rate for rice from an average of $6.50 per hundredweight to $7. The federation also wants to make sure all classes of rice, long grain, medium grain and short grain receive the same loan rate instead of three different classes. The rice group also wants to raise the target price from $10.50 per hundredweight to $11 for counter-cyclical programs.

-Keith Good