Dow Jones writer Tom Sellen reported on Friday that, “The National Cotton Council [NCC] said Friday that if press reports are true that the WorldTrade Organization has largely ruled against the U.S. in a claim by Brazil that Washington has failed to eliminate illegal subsidies to cotton growers, the finding would be ‘contrary to the facts in the world cotton market’ and ‘unsupportable.’” (Click here to view the entire NCC release).

Mr. Sellen added that, “The U.S. has already taken actions to scrap subsidies by eliminating the government’s Step 2 program, which has had a significant impact on U.S. cotton and cotton producers, the NCC said in a press release.

“As a result, U.S. cotton planted acreage is down 28% in 2007, U.S. exports have declined significantly and production is predicted to be only around 17 million bales, the lowest since 2002.

“‘It cannot be credibly argued that any payments under domestic support programs are causing any country serious prejudice in 2007 - the first year of their operation without the Step 2 program,’ the NCC said.”

Also on Friday, Senate Ag Committee Chairman Tom Harkin (D-Iowa) issued a statement on the WTO cotton development, which noted that, “We will have to see the full report and its reasoning to understand all of its implications. Undoubtedly, it is a matter of concern that our U.S. farm programsare continually being questioned in the WTO dispute settlement process. In this case, Brazil evidently will be allowed to retaliate against U.S. exports. That is a very serious outcome.

“It would be far preferable to settle these disputes through careful negotiation instead of WTO litigation. While, of course, the United States needs to defend our programs in the WTO, we also must recognize reality, solve the problems in our programs and move on. It is far more important to prepare for the future so American agriculture can succeed in this new century than to continue fighting losing cases before the WTO.”

U.S. Senator Saxby Chambliss (R-Ga.), Ranking Republican Member on the Senate Agriculture Committee also released a statement on this issue Friday, indicating that, “While the panel decision is confidential, based on published reports, it is troubling that the WTO ignored the changes Congress made last year to the cotton program and the current state of the cotton market. To say the U.S. cotton program is causing harm to Brazil or any other country, ignores the simple facts and will further enforce doubts farmers and ranchers have in the dispute settlement process in the WTO. With this in mind, the legal process is incomplete and I fully expect the United States to appeal this decision.

“Let me be very clear, changes tothe cotton program will be made consistent with our international obligations. But, we will not gut the safety net for cotton producers despite calls by Brazil and others to do so.”

Meanwhile, in news regarding the WTO round of Doha trade talks, British Prime Minister Gordon Brown stated in an item published in today’s Washington Post that, “And just as we are united in tackling global terrorism, so we are united in our belief that globalization should be seen as an opportunity and not simply a threat. This is why I know that by working together we can restart the Doha round of world trade talks to the benefit of the whole world economy.”

Reuters writers Caren Bohan and Adrian Croft reported today that, “British Prime Minister Gordon Brown was expected to walk a fine line in talks on Monday with President George W. Bush, keeping some distance on issues like Iraq while preserving the ‘special relationship’ with the United States.

“During their two-day meeting at the Camp David retreat in Maryland’s Catoctin Mountains, Brown was set to seek support for a package of measures to try to end the conflict in Sudan’s Darfur region.”

The article added that, “Aides to Brownsay he wants to focus on ending the Darfur conflict and breaking a deadlock in the global trade talks.”

In addition, on Friday, WTO Director General Pascal Lamy provided a report to the General Council; Mr. Lamy’s statement regarding the report can be found at this WTO webpage, which also included this summary of his remarks; “Director-General Pascal Lamy, in his report to the General Council on 27 July 2007, said recent meetings pointed to the negotiators’ ‘high level of commitment to concluding the Round’. He also noted ‘some significant differences’ but that ‘convergence is within our reach if you are all ready to show the necessary will and flexibility to close the gaps’”.

Also of interest with respect to WTO ag issues, Randy Schnepf & Jasper Womach, specialists in agricultural policy at the Congressional Research Service, put together a PowerPoint presentation on July 3, 2007 entitled, “Exposure of U.S. Farm Policy to Challenge under WTO Rules: A Powerpoint Summary.”

This presentation is a treasure trove of useful information; however, slide 36 is of particular interest. FarmPolicy highly recommends taking a look at this presentation.

In a broader look at Doha and trade, Ernesto Zedillo, writing recently at Forbes.com, stated that, “Just as when the talks collapsed at the Cancun WTO ministerial meeting in September 2003, U.S. officials blamed the Potsdam failure on India’s and Brazil’s intransigence. It’s true that throughout the negotiations those leading emerging countries held fast to their highly defensive positions and to the last minute were unwilling to offer meaningful cuts in industrial tariff ceilings. But the fundamental cause of the Doha Round’s failure lies in the rich countries’ refusal to seriously reform their agricultural protectionism. The debacle is rooted in the lack of political will in those countries to dismantle a system that costs their taxpayers and consumers huge amounts of money and channels most of that money to only a small proportion of rich producers and other rent seekers in the farm sector. This protectionist system severely distorts world agricultural markets to the detriment of poor farmers in developing countries and serves as an argument for this group of countries to stick to their own protectionist policies.

“The cost of the round’s failure is not only in the income opportunities lost to both developed and developing countries by not opening their markets further but also, and more important, in the enormous losses all will incur if the round’s collapse causes the multilateral trading system to deteriorate to the point that countries fall into a protectionist spiral. Because it would be so economically devastating, this scenario may appear unlikely even to those politicians who talk isolationism to enhance their popularity but, when it comes to the consequences of closed and distorted markets, know better. They may sincerely believe that riding the antiglobalization wave constitutes the best way to control and limit that force’s antitrade effects while at the same time earning them the political capital they need to pursue other important structural reforms. That would be the most benign interpretation of the latest populist rhetoric heard on both sides of the North Atlantic. The problem with this is that delusion and bad politics are coming together as usual, and sooner or later bad politics will lead to bad economics.”

***

Associated Press writer David Mercer reported today that, “Corn farmers aren’t the only ones who have been thankful for rain in the last few weeks.

“Ethanol producers are also happy that the rain helped the corn- their main ingredient-rebound from what was shaping up to be a mediocre growing season.

“Rain has fallen off and on through most of July in parts of the central and eastern Corn Belt, just as the crop started pollinating. The rain has improved the health of the crop and, to the delight of ethanol makers, driven down corn prices.”

The AP article added that, “Corn prices, which have been easing since hitting $4 a bushel in February, have responded. A DTN price index of cash-market corn - which accounts for most of the corn used to make ethanol, according to [Rick Kment, an ethanol analyst with DTN] - stood just under $3 on Friday.

“The price drop, Kment said, has pushed a lot of investment funds out of the corn market in the past few weeks, taking even more air out of prices.

“‘You can make very good returns at $3 corn,’ said Dave Nelson, chairman of Minneapolis-based Global Ethanol LLC, which has plants in Iowa and Michigan. ‘When it gets to $4, it gets pretty tight.’”

Bruce A. Babcock provided an interesting look at prices and ethanol, among other considerations, in a recent article entitled, “Farm Programs, Fuel Mandates, and Agricultural Prosperity,” which was published in the Iowa Ag Review Online.

Dr. Babcock noted that, “The future looks bright for corn, soybean, and wheat farmers. Corn farmers can lock in a price on the Chicago Board of Trade of $4.00 per bushel for their 2008, 2009, and 2010 crops. Soybean farmers can lock in $9.00 per bushel for 2008 and 2009, and wheat farmers can lock in $5.50 for the same two years. After adjusting for basis, this corn price is 65 percent greater than the average price received by corn growers for their 2002 to 2005 crops. The soybean price is up 42 percent and the wheat price is up 51 percent over the 2002 to 2005 levels. If futures contracts traded out even further, there is no doubt that these high prices could be locked in for an even longer period.

“Three factors help explain why traders in Chicago believe that crop prices seem poised to remain at such high levels. The dollar is down 15 percent on a trade-weighted basis relative to its level during the 2002 to 2005 crop marketing years. A weaker dollar increases demand for U.S. goods, thereby raising their prices. Continuing strong income growth in China, India, and other Asian countries combined with rapid urbanization has led to strong demand for meat and dairy products, which in turn has resulted in strong demand for feed grains and oilseeds. And finally, U.S. ethanol production from corn has doubled in the last three years and is poised to double again in the next two. This has led to sharply higher demand for corn, higher corn acreage, and relatively smaller soybean and wheat acreage. Wheat prices have also been strengthened by short crops in major producing areas.”

After an interesting discussion regarding budgetary issues, the article stated that, “Biofuels policy seems poised to keep program crop farmers prosperous for the foreseeable future. Given these circumstances, Congress and farm groups could focus their farm bill writing efforts on problems not previously addressed by farm bills (low yields) or on problems caused by high crop prices (possible environmental degradation and higher food prices). However, most efforts seem focused on either maintaining status quo programs or increasing commodity payments to farmers despite the promise of farm prosperity from high crop prices. Perhaps we should not expect anything else in our representative form of government. After all, if groups do not pursue their own self-interest, who will pursue it for them?

“Given tight public funds and knowledge that passage of a status quo farm bill will do little to address the future needs of farmers, consumers, and the environment, momentum could build for a reform bill. However, legislative inertia is a powerful weapon in the hands of those who benefit from the status quo. Given the short period of time that Congress has to work on farm legislation and the natural desire to do no harm through unintended effects caused by adoption of new programs, it is likely that much of what we currently have in the farm bill will be with us in the new farm bill.”

Keith Good