Congressional Quarterly’s Catharine Richert reported on Friday that, “The fragile lobbying alliance between conservation groups and fruit and vegetable growers will be put to the test next month, when lawmakers release their draft of the 2007 farm bill…Last September, specialty-crop growers and land-preservation groups rallied behind a $5 billion, bipartisan initiative called the EAT Healthy America Act. The plan, reintroduced in the House this year (HR 1600) by Democrat Dennis Cardoza of California, would boost funding for farmland preservation and produce growers in the rewrite of the 2002 farm law (PL 171-107)…But with money expected to be tight in the farm bill, lobbyists say the alliance may splinter if one group fares better than the other in a manager’s mark that House Agriculture Chairman Collin C. Peterson, D-Minn., plans to unveil before the Memorial Day recess.”

I. Farm Bill Focus
II. Disaster Aid
III. US / EU- DDA
IV. “Who Owns Biofuels Inc.?”- Des Moines Register Series
V. Food Safety

I. Farm Bill Focus

Congressional Quarterly reported this morning that, “Democratic leaders would like to appoint conferees on the budget by the end of the week, with the aim of adopting a completed budget next week. To date, neither chamber has appointed conferees, even though both chambers adopted their budgets in late March.”

Jerry Hagstrom, in an article published in this morning’s Ag Week, picked up on the importance of the budget issue in the 2007 Farm Bill debate; “[House Agriculture Committee Chairman Collin Peterson, D-Minn.] also said he is continuing to work with the House leadership to try to find offsets that would allow up to $20 billion in additional spending for renewable fuels, conservation and the fruit and vegetable industry. He said he also is talking with Reps. Ron Kind, D-Wis., and Earl Blumenauer, D-Ore., ‘who want more money for their districts’ and Rep. Jeff Flake, R-Ariz., ‘who wants to get rid’ of the farm bill.

“Peterson said he thinks the farm bill deserves the $20 billion reserve fund in the fiscal year 2008 House budget resolution because the 2002 farm bill has cost $60 billion less than projected because of high commodity prices.”

More specifically, Mr. Hagstrom noted that, “Peterson said he is unwilling to take money out of the commodity title that benefits producers of crops such as cotton, wheat, corn and soybeans for other sections of the bill because the spending in the commodity title is 43 percentbelow the CBO projection in 2002, while spending on conservation has risen 9 percent and on nutrition programs, 53 percent. Peterson noted that spending on conservation would have risen more if the appropriators had not limited spending on the wetlands reserve program.

“‘There is no money in the commodity title to shift to some other place,’ Peterson said.

“But he added that it’s hard for Farm Belt legislators to explain why they are sending farmers direct payment checks when prices are high and crops are good.”

The editorial board at The New York Times today also offered some insight into the budget process by highlighting subtle differences in the “pay-go” budgetary rules that have been implemented by the House and Senate.

“‘Pay-go,’ which was abandoned in 2002, is vital to restoring budget discipline. It would require Congress to pay for new spending on entitlements, like Medicare, either by raising taxes or cutting other entitlements. It would also require legislators to make up forgonerevenue from new tax cuts by raising other taxes or cutting spending,” the Times noted.

“There are differences, however, in the chambers’ approaches to pay-go. The House’s approach is better because it has no tricky escape hatches. In contrast, the Senate’s version of the budget contains an amendment that would make it all too easy to sidestep the rule. For example, 60 senators would be able to pass a bill today to extend Bush-era tax cuts set to expire in 2010, claiming that the resulting revenue losses would be ‘paid for’ by a budget surplus projected for 2012.”

And on the issue of direct payments, the April 27 edition of The Kiplinger Agriculture Letter reported (page one) that, “Here’s a peek at the drafts coming from [Senate Ag Committee Chairman Tom Harkin (D-Iowa)] and Peterson: Direct crop payments to farmers will be slashed. The aid is paid on each crop’s historical acreage and costs USDA about $5 billion a year.”

The Kiplinger Ag Letter also noted that, “Countercyclical crop supports are to be retooled. Higher payments will give farmers more help when both crop yields and prices are poor…Long-term disaster relief is a sure bet, replacing ad hoc plans, which have averaged $1.8 billion a year in recent years. The new program will complement crop insurance. But farmers will have to sign up for it and pay a premium. That’ll hold costs down to perhaps $1 billion or so while giving farmers another way to limit losses to weather and disease.”

The tight budget situation and eventual spending allocations also hold the potential to splinter some political alliances in the 2007 Farm Bill debate.

Congressional Quarterly’s Catharine Richert reported on Friday that, “The fragile lobbying alliance between conservation groups and fruit and vegetable growers will be put to the test next month, when lawmakers release their draft of the 2007 farm bill.

“Last September, specialty-crop growers and land-preservation groups rallied behind a $5 billion, bipartisan initiative called the EAT Healthy America Act. The plan, reintroduced in the House this year (HR 1600) by Democrat Dennis Cardoza of California, would boost funding for farmland preservation and produce growers in the rewrite of the 2002 farm law (PL 171-107).

“But with money expected to be tight in the farm bill, lobbyists say the alliance may splinter if one group fares better than the other in a manager’s mark that House Agriculture Chairman Collin C. Peterson, D-Minn., plans to unveil before the Memorial Day recess.”

Ms. Richert also noted in her CQ article that, “Cardoza, who chairs the Agriculture subcommittee with jurisdiction over fruit and vegetable growers, acknowledged concerns about the delicate coalition.

“‘I’ve told the conservation and specialty-crop groups, ‘Don’t start fighting,’’ he said. ‘If people get greedy, they will destroy the entire bill.’

“Still, Cardoza said, no farm bill that shortchanges conservation and specialty crops can win the votes of enough California, Florida and Texas lawmakers to pass.

“‘If we want a farm bill this year, we’re going to have to fund specialty crops,’ he said.”

With respect to specialty crops, DTN’s “Washington Insider” column stated on Friday (link requires subscription) that, “[W]hen powerful officials make their thoughts known, they often attract attention — as was the case when Sen. Tom Harkin, D-Iowa, told members of Senate Agriculture Committee this week that more federal resources should go to specialty crop groups. Harkin said he wants the new farm bill to include initiatives to encourage fruit and vegetable consumption and help producers make a profit and succeed against foreign competition.”

The DTN item indicated that, “Lawmakers did not commit to including specialty crops under the federal subsidy programs, but most members acknowledged a need to provide more support for that growing industry.

“Actually, much of the Senate committee’s discussion about specialty crops appeared to be already behind the curve. Proposals from most groups, including the administration, the American Farm Bureau Federation, and others, would end the current constraint on specialty crop plantings on commodity program base acreage. And, they would provide a number of research, conservation and market development programs to specialty crop producers in return.

“Still, supporters of ‘mostly conventional’ commodity programs such as the Farm Bureau likely are looking over their shoulders as the new coalitions of environmentalists, food program advocates and specialty crop producers take shape in the early rounds of the debate.”

In other Farm Bill news developments, the editorial board at the Los Angeles Times opined today that, “American consumers pay about twice the world market price for sugar, thanks to a complicated system of price supports and import quotas. It isn’t just sugar prices that areaffected — any food or beverage maker that uses a sweetener faces higher manufacturing costs, which they pass on to their customers. That’s why such a vast collection of corporate interests is lining up against the government subsidies.

“Congress is negotiating the 2007 farm bill, which will set U.S. agricultural support levels for the next five years. So far, the bill is not shaping up to be much of an improvement over the 2002 version, a $20-billion-a-year extravaganza of agribusiness welfare. Despite the heavy damage that sugar policy has inflicted on consumers and the environment, the odds of reform this year are slim. That’s because, for the anti-sugar lobby, this is just one concern of many; for sugar growers, it’s a life-and-death battle. Sugar is grown in 19 states, and growers contribute heavily to congressional campaigns.”

The LA Times indicated that, “But even if Congress can’t find the courage to beat sugar growers, it might be able to buy them out. Not long ago, peanuts and tobacco enjoyed similar protections — the government artificially inflated their prices by restricting imports and setting quotas on how much domestic producers could grow. But in 2002, the government bought back production quotas from peanut farmers, then made a similar deal with tobacco growers in 2004. In essence, these farmers gave up all market protections in exchange for set payments overa finite number of years.”

For more on the broader “buy-out” concept, see this report from the Cato Institute, “Freeing the Farm: A Farm Bill for All Americans,” which was released on April 16. To view an interesting presentation and discussion regarding this paper which featured David Orden, International Food Policy Research Institute; Clayton Yeutter, Former Secretary of Agriculture and United States Trade Representative; and Sallie James, Trade Policy Analyst, Cato Institute from last Thursday, just click here.

To listen to an explanation of the buy-out principle, see this FarmPolicy interview with David Orden from last month.

II. Disaster Aid

The editorial board at The Forum (North Dakota) noted on Friday that, “The votes in the U.S. House and Senate – mostly along party lines – to compel President Bush to begin withdrawing troops from Iraq will be vetoed. Since there are not enough votes in either chamber to override, the legislation, which contains $124 billion to fund the war, will go nowhere. The president’s policy will remain in effect.

“But despite the quixotic nature of the legislation, there was another problem with the measure: It was festooned with all sorts of non-war-related goodies, including a $3.5 billion farm disaster relief package. While that might be business as usual in Washington, it’s the kind of stunt that erodes Congress’ credibility.

“The ag provision had the enthusiastic support of Rep. Earl Pomeroy, D-N.D., and House Agriculture Committee Chairman Collin Peterson, D-Minn. They should have pulled it out of the Iraq bill for two reasons.

“First, there was no chance the Iraq pullout legislation would be successful. Second, if the farm disaster provision has merit, it should stand on its own.”

Concluding, the editorial stated that, “Don’t misunderstand. The disaster money is needed, and has been needed for some time. Pomeroy and Peterson take second place to no one in Congress when it comes to supporting farmers and agri-business. But attaching a farm disaster provision to legislation they know has no chance of becoming law makes no sense. It seems to be little more than a political move designed to remind their constituents they are advocating for agriculture.”

III. US / EU- DDA

John D. McKinnon and Marcus Walker reported in Saturday’s Wall Street Journal that, “With British Prime Minister Tony Blair set to leave office this summer, President Bush has found a new international ally in German Chancellor Angela Merkel. But while the two leading conservatives are cooperating on security issues such as Iran’s nuclear program, they have yet to achieve big breakthroughs on tough economic and environmental issues.

“Their wary courtship continues Monday as the German chancellor, who also currently holds the European Union’s rotating presidency, visits Washington for a one-day U.S.-EU summit.

“While Ms. Merkel and other EU leaders had hoped to announce U.S. movement on addressing climate change at the summit, the prospects for a meaningful deal have all but vanished, EU officials say. Progress on a global trade deal through the Doha round of talks also has been slow.”

The Journal added that, “So, instead of big breakthroughs, Ms. Merkel is likely to be left with a few consolation prizes. The main deal is expected to be an agreement to promote closer economic integration between Washington and Brussels by eventually harmonizing standards in areas such as biodiesel fuel, accounting and intellectual-property rules. That is expected to include the establishment of a trans-Atlantic economic council, which will look at existing regulatory differences in such areas as autos and medical devices, and at ways to improve coordination of future regulations.”

Reuters writer Noah Barkin reported this morning that, “Separately on Monday, the EU and United States will express a desire for prompt agreement on the Doha round of world trade talks, according to the draft” [a draft of a joint statement between the U.S. and EU which was viewed by Reuters news].

IV. “Who Owns Biofuels Inc.?”- Des Moines Register Series

The Des Moines Register began a series yesterday that will focus on investments in biofuels production in Iowa.

Specifically, a reporter’s note on the series from Jerry Perkins indicated that, “Some argue the state will not fully benefit from the boom without attracting more outside investment. Others say rural communities will benefit more if Iowans invest — and hold on to — more of a stake in the growing industry.

“How people, companies and the government invest in biofuels will determine whether the state realizes its full potential to become an energy producer.

“In this continuing series of stories in The Des Moines Sunday Register, we look at those issues and try to weigh the pros and cons.”

Here are excerpts from some of the stories that were published in yesterday’s paper,

* “Biofuel industry branches out, outside investors flow in,” by Paula Lavigne (4.29) – “Iowa may be the nation’s renewable fuels leader, but Iowans won’t see most of the profits from the state’s biofuel plants….Out-of-state investors already own a majority of projected ethanol and biodiesel production in Iowa and they’re likely to acquire more….Though farmers triggered much of the state’s ethanol boom, plants primarily controlled by out-of-state or foreign investors account for at least 57 percent of Iowa’s renewable fuels, an analysis by The Des Moines Sunday Register show.”

* “Does the industry still need financial assistance?” by Paula Lavigne (4.29)- “More than 47 percent of the economic development incentives awarded by Iowa have gone to companies that are primarily owned by non-Iowans. About 44 percent has gone to companies in which at least a majority is owned by Iowans. The remaining money was distributed to Broin Companies, now known as Poet. That company has refused to identify who owns the plants they built and operate.”

* “Biofuel fuels change in Iowa Falls.” by Jerry Perkins (4.29)- “Biofuel producers, livestock feeders and crop producers have generated change that could repeat in other cities across Iowa with new plants. There’s more jobs, increased traffic, higher tax revenues, farmland values and corn prices, and more sales on Main Street.”

* “Biofuels Money 101: Mixing public, private.” Q & A (4.29)- “Q. What’s the right balance between local and outside ownership?

A. Experts disagree. Some say the industry shows better promise of expanding with a mix of investors. But research at Iowa State University also shows rural economies benefit more when an ethanol plant is owned by local investors, because those investors reinvest their earnings locally.”

V. Food Safety

David Barboza and Alexei Barrionuevo reported in today’s New York Times that, “As American food safety regulators head to China to investigate how a chemical made from coal found its way into pet food that killed dogs and cats in the United States, workers in this heavily polluted northern city openly admit that the substance is routinely added to animal feed as a fake protein.

“For years, producers of animal feed all over China have secretly supplemented their feed with the substance, called melamine, a cheap additive that looks like protein in tests, even though it does not provide any nutritional benefits, according to melamine scrap traders and agricultural workers here.

“‘Many companies buy melamine scrap to make animal feed, such as fish feed,’ said Ji Denghui, general manager of the Fujian Sanming Dinghui Chemical Company, which sells melamine. ‘I don’t know if there’s a regulation on it. Probably not. No law or regulation says ‘don’t do it,’ so everyone’s doing it. The laws in China are like that, aren’t they? If there’s no accident, there won’t be any regulation.’”

The Times added that, “The link to China has set off concerns among critics of the Food and Drug Administration that ingredients in pet food as well as human food, which are increasingly coming from abroad, are not being adequately screened.”

-Keith Good