Reuters news reported yesterday that, “President George W. Bush on Thursday said he hopesto present Congress with a new world trade deal before leaving office in January 2009…‘Hopefully, I’ll be able to bring back a successful negotiations on Doha for a congressional vote,’ Bush told reporters during a White House press conference when asked about goals for his remaining time in office…The United States and other key World Trade Organization members recently have set a target of finishing the Doha round of world trade talks by the end of the year.”

I. Farm Bill Developments
II. President Bush on Doha

I. Farm Bill Developments

House Ag Committee Recap

A news release issued yesterday by the House Ag Committee stated that, “Today, the House Agriculture Subcommittee on Livestock, Dairy, and Poultry approved proposals for the Farm Bill sections under its jurisdiction. Congressman Leonard Boswell of Iowa is the Chairman of the Subcommittee.

“The Subcommittee considered a discussion draft outlining two subtitles of Title I of the Farm Bill and approved two amendments by roll call vote.”

The release also included these more specific details, “Subtitle A – Dairy-Related Provisions: The discussion draft considered and approvedby the Subcommittee requires a dairy product price support program through federal purchasing of dairy products, makes permanent the dairy forward pricing program, extends the dairy export incentive program, streamlines the Federal milk marketing order process by instituting deadlines, and requires the U.S. Department of Agriculture (USDA) to reassess its reporting procedures for nonfat dry milk and its effect on milk marketing order minimum prices.

“Subtitle B – Miscellaneous Provisions: The discussion draft also repeals the prohibition on the use of a mandatory animal identification system to implement country-of-origin labeling, recognizes the importance of eradicating pseudorabies in swine under the Animal Health Protection Act, and prevents a State or locality from prohibiting the interstate shipment of USDA-inspected and approved meat.

“Amendments approved by roll call vote:
- An amendment by Subcommittee Chairman Leonard Boswell of Iowa to allow for voluntary arbitration to resolve livestock or poultry contracts.
- An amendment by Representative Steve Kagen of Wisconsin to authorize Federal support for domestic veal producers.”

A separate news release issued yesterday by Subcommittee Chairman Boswell addedthat, “‘I’m also pleased that my amendment was adopted that would prohibit mandatory arbitration in production contracts,’ added Boswell. ‘Many say that arbitration can be a useful tool to settle disputes. I don’t disagree; however I do not believe that it should be mandated. My amendment requires it to be voluntarily agreed upon by both parties. We must ensure that producers have the option.’”

Brownfield’s Peter Shinn, in a report from yesterday, added that, “Boswell introduced, and then withdrew, two other amendments dealing with competition issues, one aimed at improving mandatory livestock price reporting, another that would limit the ability of processors or packers to terminate contracts with ag producers. And it appeared that the arbitration amendment passed only because Subcommittee ranking Republican Robin Hayes was otherwise occupied and didn’t object.”

Reuters writer Christopher Doering provided additional detail with respect to the Subcommittee’s action in an article from yesterday, “A new U.S. dairy support program based on the price of cheese, butter and dry milk rather than milk prices was approved by a House Agriculture subcommittee on Thursday for the new farm bill.”

The article noted that, “The new support program was among dairy, poultry and livestock provisions sent to the full committee for review in June.

“Under the program, Agriculture Department would buy nonfat dry milk for at least 80 cents per lb, butter for at least $1.05 per lb, and cheddar cheese for at least $1.10 per lb in barrels and $1.13 per lb in bricks. USDA now buys surplus dairy products with the goal of assuring a minimum price of $9.90 per 100 lbs of milk.

“An amendment to extend the Milk Income Loss Contract (MILC) in the 2007 farm bill was withdrawn in the subcommittee… [B]ut lawmakers are expecting MILC to receive funding in the Iraq supplemental bill that would extend the program an additional month, restoring the baseline and allowing funding for an additional five years without the House Agriculture committee having to come up with the money.”

War Supplemental: Ag Disaster Aid- MILC

With respect to the war supplemental, a separate news release issued yesterday by the House Ag Committee stated that, “Despite stiff opposition from President Bush, the U.S. House of Representatives has prevailed to pass a supplemental appropriations bill that includes about $3 billion for agriculture disaster assistance that will provide needed relief to farmers and ranchers nationwide who experienced serious losses in 2005-2007.”

This news release indicated that, “The agriculture disaster assistance package includes assistance for farmers who lost 35% or more of their crop in 2005, 2006 or 2007 and for livestock producers in counties that experienced USDA designated natural disasters during that time. Producers can apply for a disaster payment for only one of those three years, and for the first time, only farmers who had insured their crop through crop insurance or the Non-Insured Assistance Program are eligible for payments.”

(For more detail regarding disaster assistance, see this Congressional Research Service Report, “Agricultural Disaster Assistance,” by Ralph M. Chite, which was issued on May 2, 2007. The Non-Insured Assistance Program is discussed in pages two and three of this CRS report).

Associated Press writer Andrew Taylor flushed out more details on the war supplemental in an article from yesterday; “In Washington, it pays to read the fine print. The Iraq funding bill is a perfect example, studded with provisions to help dairy farmers, airlines, salmon fisherman and rural counties hurt by cutbacks in federal logging…[T]ake dairy farmers, for example. They’re receiving $1.2 billion in help in the Iraq bill as lawmakers clear the way to renew a subsidy program aimed at smaller milk producers.”

Mr. Taylor explained that, “The 12-line MILC provision has its roots in a battle from two years ago over extending the program, which expired briefly in 2005.

“Then, opponents such as Agriculture Committee Chairman Bob Goodlatte, R-Va., grudgingly agreed to renew the program as part of a broader deficit-reduction bill, but only after making sure it wouldn’t be factored into budget estimates allotting funds to rewrite the farm bill this year. Goodlatte’s move put the MILC program at a disadvantage since it required lawmakers to cut other popular farm programs in order to extend milk subsidies this year.

“The war funding bill fixes all that by adding $1.2 billion over five years- violating the spirit of new pay-as-you-go rules requiring increases to farm programs to be ‘paid for’ by cuts elsewhere- to the pot of money available for this year’s rewrite of farm programs.

“What is more, under arcane budget rules, that money is made available only for the MILC program.”

Budget- $20 Billion “Reserve Fund”- Conservation Programs

Reuters writer Charles Abbott reported yesterday that, “Lawmakers will use part of a $20 billion reserve fund to pay for the new U.S. farm law, the chairman of the House Agriculture Committee said on Thursday, but none of it will go toward fattening crop subsidies.

“Chairman Collin Peterson told reporters it was becoming clearer that his committee will be able to dip into the reserve, which could prevent the planned mothballing of the first ‘green payment’ program for land stewardship.

“Money also may be available to enroll more land in wetland and grassland programs, said Peterson, Minnesota Democrat.”

Mr. Abbott explained that, “Without specifying, Peterson said there would be ‘reforms in the commodity title’ including how money is allocated. He has been critical of $5 billion guaranteed to farmers each year and has said some of the money could be used to offset low market prices or to pay for an ever-ready disaster program.

“When Congress created the reserve, it said the money could not be used unless lawmakers found offsets, meaning new revenue or spending cuts. Peterson said a repeal of tax breaks for oil companies would cover the cost of bio-energy initiatives.

“‘The rest of it, we’re looking around,’ said Peterson. He declined to say how much of the fund would be allocated but, ‘It will not be the full $20 billion.’”

Philip Brasher, writing yesterday at The Des Moines Register Online, noted that, “Congressional Democrats plan to increase spending for farm programs by as much as $4 billion without knowing how they will pay for the cost.

“Sen. Tom Harkin, the chairman of the Senate Agriculture Committee, said Thursday he plans to write a new farm bill that is ‘visionary and forward looking.’

“‘Where we get that money is going to take another process,’ the Iowa Democrat said.

“Harkin’s counterpart in the House, Rep. Collin Peterson, D-Minn., worked out similar spending plans with the House Democratic leadership.”

Mr. Brasher added that, “Harkin said he planned to spend all of the additional money permitted by a congressional budget resolution — $20 billion over five years. Peterson said he did not plan to spend that much but did not specify an amount.”

Brownfield’s Peter Shinn also noted yesterday that, “Apparently some of the $20 billion dollar reserve fund allocated to the House Agriculture Committee by the Budget Committee to write the next farm bill will be used without offsetting spending cuts. That’s according to House Agriculture Committee Chairman Collin Peterson, who told reporters Thursday a meeting Wednesday with the House leadership made him feel comfortable spending at least part of the reserve fund. But Peterson also vowed that the Ag Committee won’t spend all of it.

“‘I will say this much,’ Peterson averred. ‘It will not be the full $20 billion.’

“Peterson added that Tuesday’s mark-up of the farm bill conservation title might have gone differently had he known he had a green light to touch the reserve fund. Subcommittee leaders turned away any amendment to the conservation title that would have cost money unless it also contained an offsetting spending cut.

“Indeed, Peterson suggested some of the reserve fund might go toward funding Conservation Security Program (CSP) sign-up. The House version of the farm bill conservation title freezes CSP sign-ups until 2012, and then re-writes the program entirely. Peterson said, while he and other House members ‘weren’t interested’ in creating ‘another entitlement program for landowners,’ he also recognized that CSP in its current form enjoys the strong support of Senate Agriculture Committee Chairman Tom Harkin.”

A news release issued yesterday by Chairman Harkin stated that, “Senator Tom Harkin (D-IA) today detailed what he believes should be included in a new conservation title of the 2007 farm bill. It includes a range of conservation incentives that will deliver major benefits, including cleaner water, cleaner air, more abundant wildlife, and a healthier environment for all Americans.”

To listen to a more detailed audio recap on this issue from Sen. Harkin, just click here (MP3).

In more detail on this issue, an article posted yesterday at the AgricultureOnline webpage reported that, “Senate Agriculture Committee Chairman Tom Harkin (D-IA) announced plans to integrate three existing conservation programs into one that he calls the Comprehensive Stewardship Incentives Program or CSIP.”

The article added that, “Harkin proposes combining today’s conservation security program (CSP), environmental quality incentives program (EQIP) and wildlife habitat incentives program (WHIP) into the new CSIP and simplifying the signup process. He wants to spend $6 billion in new conservation funds above the budget projections, or baseline, for the next farm bill’s five years. About $3 billion of that would pay for CSIP, allowing the CSP portion of today’s farm bill to become a national program, not one limited to a few watersheds in each state.

“Harkin said he believes the CSP program is popular with farmers and pointed out that Agriculture Secretary Mike Johanns has told him that support for CSP came up consistently at farm policy listening sessions held by the USDA around the country.

“Under current budgeting rules in Congress that require expanded programs to be offset with cuts in other programs or new revenue to the federal government, Harkin has to find money to pay for his new ideas for conservation.”

An update posted yesterday at the DTN Ag Policy Blog provided additional insight into the conservation funding issue; “The chairmen of the House and Senate Agriculture Committees are still dueling over conservation programs.

“On Thursday, Rep. Collin Peterson, D-Minn., and Sen. Tom Harkin, D-Iowa, held back-to-back calls with agriculture reporters to discuss farm-bill priorities. Harkin threw out the idea of a new conservation program, the Comprehensive Stewardship Incentives Program in which he wants to merge the beleaguered Conservation Security Program with the Environmental Quality Incentives Program.”

The DTN item added that, “Peterson, who spoke a little earlier, made it clear the philosophy coming out of the House is more aid is needed to help farmers and livestock producers deal with increasing government regulation. That’s why the House proposes a hiatus for the CSP while pumping more than $1 billion more each year directly into EQIP and the Wetlands Reserve Program. Rather than create a new program for switchgrass, the House offers to expand the Grasslands Reserve by 5 million acres as well.

“‘We really don’t have the money to just dole out. We’ve got to keep it focused on where the problem areas are,’ Peterson said. ‘Secondly, I’m not sure we want to start another government entitlement program where somewhere or another they get money just because they own land. That’s not something I’m interested in.’

“Peterson acknowledged some money will go back into CSP and the House will likely reopen enrollment a little earlier than 2012. The bigger fight for CSP will come after both the House and Senate pass their bills and go into conference, which was where CSP won out in 2002.”

In a brief wrap up of this week’s Farm Bill activity, Philip Brasher stated yesterday at The Des Moines Register’s Cash Crops Blog that, “On Tuesday, when the subcommittee was writing the conservation section, virtually any attempt to increase spending was rejected.

“But on Thursday, Peterson announced a new plan: The subcommittees can go ahead and approve spending increases now and lawmakers will figure out a wayto pay for them later.

“It also doesn’t help the committee that so few members have experience in writing a farm bill. And it’s been since 1990 that the bill drafting started in subcommittees, Peterson says.

“‘You’ve got to give us a little slack here.’”

“Congress is out next week for the Memorial Day recess.”

II. President Bush on Doha

Reuters news reported yesterday that, “President George W. Bush on Thursday said he hopes to present Congress with a new world trade deal before leaving office in January 2009.

“‘Hopefully, I’ll be able to bring back a successful negotiations on Doha for a congressional vote,’ Bush told reporters during a White House press conference when asked about goals for his remaining time in office.

“The United States and other key World Trade Organization members recently have set a target of finishing the Doha round of world trade talks by the end of the year.”

Meanwhile, Dow Jones writer William Echikson reported yesterday that, “European Union Trade Commissioner Peter Mandelson Thursday signaled that the E.U.’s offer in World Trade Organization trade talks could be scaled down unless its partners made concessions.

“Mandelson spoke in Portugal a day after French President Nicholas Sarkozy took a tough line on trade in his inaugural visit to Brussels, saying he wouldn’t ‘sell off French agriculture at the lowest price.’ When asked about Sarkozy’s comments which seemed aimed at his negotiating strategy, Mandelson was conciliatory.

“‘I intend to sustain offers that we have made…but those offers are conditional on others doing the same,’ he said. ‘If that doesn’t happen, we will have no alternative but to review our offers. Europe is not going to be the sole banker of the Doha round.’”

Keith Good

Special Update: GMF Journalism Study Tour
European Agriculture in the 21st Century: Perspectives from the Farm

From May 26 through June 3, the German Marshall Fund of the United States (GMF) will be sponsoring a Journalism Study Tour in the European Union.

Nine journalists, from radio and print media outlets including, The Des Moines Register, St. Louis-Post Dispatch, KSMU-FM Ozarks Public Radio (Springfield, Missouri), NET Radio (Lincoln, Nebraska), WILL AM 580 Public Radio (Champaign, Illinois), The Minneapolis Star-Tribune, South Dakota Public Radio and The Washington Post will be touring the European Union to learn more about EU agriculture.

I will also be joining the group along with GMF Transatlantic Fellow Jack Thurston.

The group will be visiting with farmers, policy makers and other EU agricultural stakeholders in Poland, Belgium, The Netherlands and France.

At a time when the Doha Development Agenda is held up by the inability of the EU and the U.S. to agree on changes to their farm support programs, and with the U.S. Farm Bill debate well underway and a “Health Check” for the European Common Agricultural Policy (CAP) scheduled for 2008, it is a critical time for U.S. journalists to make comparative analysis between the different political aspects of agriculture in Europe and the U.S. and also observe how the policies translate into practice on European farms.

As the trip unfolds, I hope to post pictures and summary write ups that will provide FarmPolicy.com readers with information and perspective that will be helpful as debate over the future direction of U.S. farm policy is taking place.

I also plan on posting audio podcasts that will include additional insight from participants on the tour and individuals that we meet.

As a prelude to the trip, I had the opportunity yesterday to sit down and speak with Will Bohlen, the Senior Communications Officer for GMF at his office in Washington, D.C.

(Right) Will Bohlen, the Senior Communications Officer for GMF at his office in Washington, D.C.

Will provided a short history of GMF, detailed some of the goals of the organization and also addressed the issue of agriculture as an emerging transatlantic economic policy development.

In addition, Will explained how the goals of GMF are being forward by the EU Journalism Tour and talked in more detail about the trip including where we will be going and some aspects of EU farm policy that we may encounter.

To listen to our conversation, just click here (MP3).

For additional news on the GMF EU trip, see this news item that was posted recently at the Southwest Nebraska News webpage.

Keith

CBO and the Farm Bill

By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.

Lots of important ideas were brought forward during the House Agriculture Committee’s first day of drafting a new five-year farm bill this week.

Dennis Cardoza (D-Calif.), representing California’s dusty Central Valley, proposed spending $305 million to help farmers meet federal air quality requirements. USDA already helps farmers comply with water quality rules through EQIP, the Environmental Quality Incentives Program, so why not air quality regulations?

Stephanie Herseth Sandlin (D-S.D.), citing environmental concerns about the plowing of virgin prairie to grow biofuel crops, thought the committee should consider a “sodsaver provision” to protect sensitive lands.

Tim Walz (D-Minn.) proposed incentive payments to landowners who rent or sell land to beginning farmers.

But for most of the day, subcommittee chairman Tim Holden (D-Pa.) acted the part of a benevolent parent with a tight family budget. One after another, the ideas were turned aside by Holden, who said there was just no money to pay for them at this stage of writing the farm bill.

Unless the Democratic leadership frees up an additional $20 billion for the farm bill, farm bloc lawmakers say, it will be hard to finance innovative new programs.

But is the committee’s bank account really so meager? Or are the claims of penury mainly smoke and mirrors?

Under budget rules, the committee actually has $152 billion more to spend over the next 10 years than it did when it wrote the last farm bill in 2002. That’s a 25 percent increase. And contrary to what some senior lawmakers have implied, nobody has mandated any “cuts” in the sacred Title I commodity programs, which provide direct payments, protection against low prices, and other subsidies for farmers.

In fact, budget rules give the committee all the money it needs to continue these programs just as they are now, even though the current version of Title I was lambasted by editorial writers and fiscal conservatives in Congress in 2002 for being unduly generous.

It’s often hard to tell that listening to senior committee members and representatives of farm organizations. When the budget for the farm bill was being drawn up in April, Chairman Collin Peterson (D-Minn.) told reporters, “We’ve given up $60 billion in the commodity title and we’re asking for $20 billion back.. and we think we’re justified.” Since then ranking member Bob Goodlatte (R-Va.) has complained that the committee was not given a “reasonable” budget to work with.

Tom Buis, president of the National Farmers Unioin, has complained about “significantly diminished resources.” It has become a mantra—and some would say, a canard.

Neither Buis or Peterson are liars. I’ve met Peterson’s dad, a retired farmer who still shows up at 5:30 a.m. for breakfast with other old-timersat a cafe off Highway 10 in Moorhead. Dad Peterson raised his son to respect the good Minnesota virtues of honesty and straight dealing.

But the budget system gives politicians plenty of room to take liberties with reality. When Peterson talks about “giving up” $60 billion, he isn’t talking about real money, but only the projections that the Congressional Budget Office made in March about what USDA will spend on subsidies over the next 10 years if current programs continue unchanged.

Because booming demand for corn to make ethanol makes it likely prices will stay high for some time, CBO predicted in March that subsidies would fall sharply. CBO’s estimate of $80 billion in the next decade is $60 billion less than what CBO predicted would be spent going into the last farm bill.

What Peterson doesn’t say is that if prices again fall through the floor, USDA would pay out billions more than CBO is predicting now. The payments go out automatically, based on formulas, and Congress can’t control them once the programs are written into law.

The significance of this is that the ag committees could free considerable sums for new innovations by rewriting the Title 1 programs that were heavily criticized in 2002. Not doing so isn’t a result of limited resources, but of political choice.

Peterson has promised “reforms” in these programs, but has also insisted that he won’t allow any of the savings to be shifted to other areas of the farm bill, such as biofuels or conservation. In the Senate, however, committee chairman Tom Harkin (D-Iowa) said this week that he has no such rule.

“We need reforms of payment limits, and direct payments,” he said. “I don’t believe just because we’ve been doing something for 40 years that we ought to keep doing it that way.” Harkin said there may be “new commodities” that should qualify for subsidies, such as speciality crops or organic foods.

In the House, however, the insistence on protecting spending on traditional farm proglrams has created strains throughout. Some are eyeing the food stamp program as a possible source of funds for new biofuels and conservation initiatives.

CBO estimates that spending on food stamps over the next decade will grow to $565 billion—a 46 percent increase over projections made five years ago. The reason is that 7.6 million more people will be eligible. Peterson said he hoped to talk to Rep. Charles B. Rangel (D-N.Y.), chairman of the Ways and Means Committee and a passionate advocate for the food stamp program, to see if he can “find us some offsets.”

What committee leaders seldom mention is that budget rules have boosted the funding available to other, lesser known farm programs. CBO, for example, has projected that USDA will spend $66 billion over the next decade on the Section 32 program, a little known fund under the direct control of the secretary of agriculture. That is an increase of more than 50 percent over the previous five years.

Section 32 gives the secretary of agriculture almost unlimited discretion to use a portion of annual customs duties to boost farm income. Secretaries have used it to help ranchers after droughts, purchase fruits and vegetables when prices are depressed, and supply school lunch programs.

Section 32 has been described as “everybody else’s farm program,” since it benefits farmers and ranchers who aren’t covered by the traditional subsidy system. Shifting funds from Secton 32 could face political and legal challenges. But Congress writes the laws.

Since there is little will to shift money out of existing programs to finance new initiatives, farm state lawmakers are counting on being able to spend an additional $20 billion from a special “reserve fund.” The hitch is that none of that money can be spent without offsets—cuts in other programs, or tax increases.

Peterson is counting on using $5 billion of the savings in an energy bill enacted by the House earlier this year as one offset. That bill contained $14 billion in total savings from new taxes on oil company profits and offshore drillling leases. But othe committees besides Peterson’s are angling to use those savings as offsets in their bills. In any case, the “offset” could turn out to be ephemeral since the Senate has not passed the bill.

By Dan Morgan