Farm Bill

Congressional Quarterly writer Catharine Richert reported on Friday that, “For many on Capitol Hill, this week is looking a lot like do-or-die for the farm bill.

“Lawmakers and staff from the House and Senate Agriculture committees spent the two-week spring recess deciding how they’d spend an extra $10 billion above the bill’s budget baseline they’ve been promised by the Senate Finance and House Ways and Means panels.

“But there’s a problem: The Agriculture Committee members say they haven’t seen plans from the tax-writing panels on how they’ll come up with the cash.

“Lawmakers are approaching an April 18 deadline. That is when a one-month extension of the current farm law expires, the second extension since negotiations on a five-year overhaul began last year.”

Ms. Richert explained that, “Complicating matters is a scuffle in the Senate over how to spend the $10 billion above the budget baseline, assuming it can be raised. A new plan for allocating the funding, released earlier this month by the chairmen and ranking members of the Agriculture committees, called for shifting to conservation programs about $3 billion of the $5 billion originally intended for a new disaster relief trust fund.

“Senate Finance Chairman Max Baucus, D-Mont., said that was a non-starter. He was backed by another key farm bill player, Democratic Sen. Kent Conrad of North Dakota, whose home state has seen multiple droughts and floods during the last few years.”

And the CQ item indicated that, “With the April 18 deadline looming and Bush balking at a third extension unless major progress is made, lawmakers are already considering alternatives.

“Before the recess, House Agriculture Chairman Collin C. Peterson, D-Minn., and ranking Republican Robert W. Goodlatte of Virginia said they would happily write a farm bill that stays within the baseline budget in order to give farmers some certainty when they make planting decisions this year.”

To listen to an audio summary (MP3) of recent Farm Bill activity regarding the latest extension and the possibility of how a baseline Farm Bill might be funded, see this FarmPolicy.com audio podcast from March 15 (MP3- 7:52).

Commodity Issues: International Developments

Bloomberg writers Bill Faries and Karla Palomo reported on Friday that, “Argentine officials are meeting farmers today in a bid to end a strike that has forced President Cristina Fernandez de Kirchner to confront the biggest anti-government protests in more than six years.

“Farmers in parts of Argentina lifted roadblocks that led to shortages of beef, poultry and other meat after Fernandez called last night for negotiations. In the province of Entre Rios, farmers said they were waiting for ‘concrete signals’ from the government before allowing trucks to pass.

“‘This has been the most important agricultural strike in Argentine history,’ said pollster Rosendo Fraga, director of Nueva Mayoria, in an interview by Bloomberg Television. ‘The government’s top priority is to get the roadblocks lifted.’”

The article added that, “Argentines, the world’s biggest beef eaters, are facing shortages of meat and milk in supermarkets and restaurants 16 days after the strike started. Fraga said shortages could continue through next week.”

And Dow Jones writers Shane Romig and Michael Casey noted on Friday that, “While Argentine farmers temporarily halted blockades of food supplies they had maintained in protest over a soy export tax, tensions remained high Friday evening as farm group leaders met with officials in the hope of hammering out a solution to the drawn-out conflict.”

However, Reuters writer Fiona Ortiz reported on Saturday that, “Farmers reinstated their strike in parts of Argentina on Saturday after talks with the government failed to address their concerns about higher taxes on soy exports.

“The farm protest began 17 days ago, emptying meat counters and paralyzing grains exports from agricultural powerhouse Argentina, one of the world’s top suppliers of soy.

“Farm groups had called off the strike on Friday night, allowing trucks with agricultural products to circulate for the first time in more than two weeks, and sat down at the government palace for negotiations.

“The government proposed measures to protect the interests of small-scale farmers and also said it would lift a months-long ban on wheat exports during the late-night meeting.

“But farmers said they were mostly disappointed with the negotiations and roadblocks were reinstated in San Pedro in northern Buenos Aires province and in the province of Entre Rios early on Saturday.”

Meanwhile, Reuters writers Russell Blinch and Brian Love reported yesterday that, “Food prices are soaring, a wealthier Asia is demanding better food and farmers can’t keep up. In short, the world faces a food crisis and in some places it’s already boiling over.

“Around the globe, people are protesting and governments are responding with often counterproductive controls on prices and exports — a new politics of scarcity in which ensuring food supplies is becoming a major challenge for the 21st century.

“Plundered by severe weather in producing countries and by a boom in demand from fast-developing nations, the world’s wheat stocks are at 30-year lows. Grain prices have been on the rise for five years, ending decades of cheap food.”

Later, the detailed article indicated that, “After long opposition, Mexico’s government is considering lifting a ban on genetically modified crops, to allow its farmers to compete with the United States, where high-yield, genetically modified corn is the norm.

“The European Union and parts of Africa have similar bans that could also be reconsidered.

“A number of governments, including Egypt, Argentina, Kazakhstan, and China, have imposed restrictions to limit grain exports and keep more of their food at home.

“This knee-jerk response to food emergencies can result in farmers producing less food and threatens to undermine years of effort to open up international trade.”

And James Hookway reported in today’s Wall Street Journal that, “As rice prices hit new highs, farmers across Asia are hoarding theircrops, raising the prospect of a shortage in Asia and Africa that could lead to widespread unrest.”

Mr. Hookway explained that, “Chookiat Ophaswongse, president of the Thai Rice Exporters Association, says farmers and millers are already holding onto their crops as prices continue to rise. Exporters who had entered supply deals with foreign buyers are now trying to find a way to compensate their customers because they can’t physically get hold of the rice, he says.

“The problem worsened after Thai Commerce Minister Mingkwan Saengsuwan predicted last week that rice would soon hit $1,000 a ton and encouraged local farmers to make the most of the situation.

“Robert Zeigler, director-general at the International Rice Research Institute in the Philippines, says it could be months before the market gets a clear sense of how high prices could go. Worse, he said, ‘The whole market could become paralyzed. Who’s going to sell rice at $750 a ton when they think it’s going to hit $1,000?’

“Markets such as the U.S. that grow most of the rice they consume are little affected by the surge in Asian export prices.

“But big importers including Indonesia and Iran may struggle to secure orders three to four months from now, when they are expected to seek as much as one million tons each.”

Commodity Issues: Corn Demand Factors- Livestock

Last week, a University of Illinois Extension article pointed out that, “Three upcoming USDA reports will provide valuable fundamental information for crop markets. These include the Quarterly Hogs and Pigs report on March 28 and the Quarterly Grain Stocks and annual Prospective Plantings report on March 31.

“The Hogs and Pigs report will reveal the size of the winter pig crop as well as the production plans of hog producers. Current and prospective hog numbers will provide some insight into potential domestic feed demand over the next year. The December report revealed a very large fall pig crop (4 percent larger than the crop of the previous year) and plans for modest expansion through the spring of 2008. The March report will indicate whether or not the high feed prices and low hog prices experienced over the past quarter changed those expansion plans. As a side note, the Cattle on Feed report released on March 20, indicated that the number of cattle on feed in lots with at least 1,000 head capacity was 2 percent larger than the inventory of a year ago and the second highest inventory for that date since the report was initiated in 1996.”

Friday’s Quarterly Hogs and Pigs Report indicated that, “U.S. inventory of all hogs and pigs on March 1, 2008 was 65.9 million head. This was up 7 percent from March 1, 2007, but down 2 percent from December 1, 2007.”

The USDA report indicated that, “The total number of hogs under contract, owned by operations with over 5,000 head, but raised by contractees, accounted for 40 percent of the total U.S. hog inventory, up from 39 percent last year.”

For a quick analysis of the inventory number, see this brief audio clip (MP3- 0:32) from the latest Commodity Week Program (WILL AM-580-Champaign, IL- recorded on March 28). Analysts indicated that large hog numbers equates to good feed usage for corn.

And John Perkins of Brownfield reported on Friday that, “John Lawrence, Iowa State University Extension Livestock Economist, says that the bigger overall inventory was influenced by the increased marketing inventory and that the breeding herd figure indicates that the higher breeding herd number means that producers and analysts will have to wait a while to see significant herd reduction. Lawrence says the outlook for the rest of 2008 and possibly the start of 2009 is ‘not very rosy’ and sees the Iowa/Southern Minnesota live basis average price around $42 to $44; comparable carcass basis price at $55 to $60. Lawrence expects the market over the next twelve months could be ‘a pretty ugly time,’ even those producers that have their buildings paid for and raise their own corn.”

Mr. Perkins included a link to an interview he conducted with Dr. Lawrence; here is an audio clip (MP3- 0:49) from their discussion.

Food Stamps, Food Aid

As international and domestic variables regarding supply and demand continue to impact commodity markets, Erik Eckholm reported in today’s New York Times that, “Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s.”

The Times article stated that, “But recent rises in many states appear to be resulting mainly from the economic slowdown, officials and experts say, as well as inflation in prices of basic goods that leave more families feeling pinched. Citing expected growth in unemployment, the Congressional Budget Office this month projected a continued increase in the monthly number of recipients in the next fiscal year, starting Oct. 1 — to 28 million, up from 27.8 million in 2008, and 26.5 million in 2007.

“The percentage of Americans receiving food stamps was higher after a recession in the 1990s, but actual numbers are expected to be higher this year.

“Federal benefit costs are projected to rise to $36 billion in the 2009 fiscal year from $34 billion this year.”

An item posted recently at The Economist Online (“Food for Thought”), stated that, “For years, anti-poverty campaigners railed against low commodity prices, which depressed farmers’ incomes in developing countries. In recent months, the world price of virtually all staples has shot up, but the activists are still not cheering. They worry that this boom (intensified by ‘green’ subsidies for biofuel crops) may worsen poverty even more than low agricultural prices did.

“High food prices do help poor farmers, but they also hurt the more numerous category of people (poor city-dwellers as well as landless rural folk) who must buy food to survive. That ‘unintended consequence’—in the words of Gawain Kripke of Oxfam International, a British charity—has caused serious problems for the organisations that bring food aid to the poorest. The World Food Programme (WFP), a UN agency, has just issued an urgent appeal for $500m, to cover higher food costs. America’s Agency for International Development (USAID), a huge financer of food aid, is asking for $350m.”

The Economist item stated that, “The short-term outlook seems grim, both for the poor and the agencies that supposedly help them. Even before the current price boom started two years ago, food aid was running at historically low levels, perhaps half the real-terms total of two decades earlier. And the WFP says hunger is on the rise in the countries it watches. It classifies as ‘hotspots’ the places—most of central Africa, plus Afghanistan—where more than a third of the people do not get as much food as is needed. A second tier, where between a fifth and a third lack adequate food, includes much of West Africa, the Indian sub-continent and Bolivia. David Kauck of CARE, an American charity, says that pockets of real hunger also exist in many rich countries.”

Doha

Karl Meilke, in an opinion item posted yesterday at The Globe and Mail Online (“Doha is not Dead”), stated that, “Many commentators assume that the Doha round of World Trade Organization negotiations have already failed, and that failure would not matter for Canadians. Wrong on both counts.”

Professor Meilke added that, “At the centre of the negotiations is agriculture, and Canada faces significant risks if this round of negotiations fails. Some think a WTO failure wouldn’t matter because we have the North American free-trade agreement, or because we can negotiate bilateral deals with other countries. Unfortunately, Canada is an attractive market for some smaller partners but pales in comparison with the giants such as India, China and the European Union. We lack the clout of large economies when it comes to asking for concessions in bilateral trade negotiations.

“This global initiative holds far more promise than negotiations with individual countries or regional blocs, especially for agriculture. Bilateral trade deals haven’t reduced the most trade-distorting forms of farm support, particularly in Europe and the United States.

“The agricultural trade reforms that can make a difference to Canada’s agrifood exporters will only be achieved in multilateral negotiations. The proposals now on the table would cut trade-distorting support significantly and provide gains for Canada’s grain, oilseed, red meat and food processing sectors.”

The editorial item also indicated that, “The biggest risk from failure is the potential to plunge the world into a period of deteriorating trade relationships that will further embitter long-standing tensions between the U.S. and the EU, and emerging conflicts with China. U.S. presidential candidates’ threats to reopen NAFTA may be posturing, but they would have to be taken very seriously if the WTO negotiations fail.

“If grievances cannot be resolved in the multilateral negotiations, there is also a significant risk that frustrated countries will increasingly turn to litigation, thereby putting the WTO under intolerable strain. Litigation can make things worse still if countries begin to ignore the WTO’s rules and findings they dislike. In agriculture, there is a well-founded concern that, if the WTO loses credibility, food safety worries with no foundation in science will be raised as a red herring issue to block trade.”

Keith Good

Recall that last month (February 22), a Dow Jones news article stated that, “U.S. 2008-09 corn planted area is estimated at 90 million acres and production is seen at 12.81 billion bushels, according to the U.S. Department of Agriculture, which released its grains and oilseeds outlook Friday at its annual Agricultural Outlook Forum.”

The article noted that, “In 2007-08, corn planted acreage was 93.6 million acres, with harvested area at 86.5 million, according to the USDA’s February supply and demand report.”

With respect to soybeans, the Dow Jones article stated that U.S. producers would plant 71 million acres of the oilseed in 08-09. “In 2007-08, soy planted acreage was 63.6 million acres, with harvested area at 62.8 million, according to the USDA’s February supply and demand report,” the article said.

And regarding wheat acreage, USDA estimates that 64 million acres will be planted in 2008. This is an increase from last year, when U.S. farmers planted 60.4 million acres of wheat, the article noted.

On Thursday, February 21, USDA Chief Economist Joe Glauber provided a broad overview of the U.S. agricultural economy and discussed anticipated acreage levels for the 2008-growing season (transcript available here).

In part, Dr. Glauber noted that, “Cropland area is expected to expand in 2008 with higher expected net returns for the major field crops. Combined planted area for the 8 major field crops (corn, sorghum, barley, oats, wheat, rice, upland cotton, and soybeans) is expected to reach 252.3 million acres, up 6.8 million acres from 2007 (figure 1). Higher area is supported by strong incentives to expand overall planting including double crop soybeans with an additional 1.6 million acres of soft red winter wheat sowed last fall. Also available for planting is 2 million acres of Conservation Reserve Program (CRP) land from contracts not renewed last October.

“Leading the expected expansion in area is higher wheat seedings and a substantial rebound in soybean area (figure 2). Wheat farm prices are projected at record levels again in 2008/09 even as high prices last fall encourage expansion in fall seedings and record prices for durum and spring wheat are expected to boost area for these crops in the Northern Plains. Farm prices for soybeans are projected at a record again for the coming year boosting net returns sharply higher compared to last year at this time. Corn acreage is expected to decline in 2008 reflecting stronger competition from soybeans this year; however, corn plantings will remain well above those in recent years as expected returns are up substantially from last year at this time even with higher fertilizer costs. Upland cotton and rice also are expected to lose area in 2008 as year-to-year gains in net returns fall short compared to the other crops.”

For a more detailed narrative breakdown of the planted acreage estimates, which includes excerpts from Dr. Glauber’s presentation on February 21, as well as analysis from University of Illinois Agricultural Economist Darrel Good from February 22, see this brief FarmPolicy.com podcast from February 22 (MP3). The audio recap (MP3) only lasts about five minutes.

And with respect to Dr. Glauber’s remarks from last month regarding corn profitability (“expected returns are up substantially from last year at this time even with higher fertilizer costs”), note that a recent analysis by University of Illinois Agricultural Economists Gary Schnitkey and Darrel Good (“Corn Versus Soybean Returns in 2008”), stated that, “How many acres of corn and soybeans will be planted this year is of great interest and could impact relative corn and soybean prices. Most projections indicate fewer corn acres and more soybean acres will be planted in 2008 as compared to 2007.

“Relative profitability of corn and soybeans may impact acreage decisions. Given current cash bids for fall delivery, our analysis suggests that corn will be more profitable than soybeans in 2008 on many farms in Illinois…”

The Associated Press reported on Friday that, “Wheat for May delivery dropped 24 cents to $9.90 a bushel; May corn rose 5.5 cents to $5.61 a bushel; May soybeans dropped 57.25 cents to $12.70 a bushel.”

As projections for an increased number of total planted acres in the U.S. increase for the 2008 growing season, Sue Kirchhoff and Jeff Martin reported last week at the USA Today Online that, “The USA’s open plains and prairies are threatened by soaring grain prices that have increased their value as cropland. Grain prices have been driven up by a seemingly insatiable worldwide appetite for food and by federal energy policies promoting corn-based ethanol that are working at cross purposes with government programs designed to conserve open spaces.

“As a result, landowners in South Dakota and across the USA’s Farm Belt are converting to cropland marginally productive acres that for decades — in some cases, centuries — have remained uncultivated because farming them wouldn’t have been profitable or because of their environmental value.”

The article stated that, “Conservationists warn that the current commodity and ethanol frenzy could undo years of hard work and undercut the investment of taxpayer money that has bankrolled federal land- and water-protection programs.

“‘A generation of conservation accomplishments could be rolled back’ if commodity prices remain near historic highs, warns Ken Cook, head of the non-profit Environmental Working Group.”

Meanwhile, Lauren Etter reported in yesterday’s WallStreet Journal that, “Investors from Wall Street to the Great Plains will be watching Monday morning when the U.S. Department of Agriculture releases its annual report on how much farmers will be planting of which grains. The report holds big implications for livestock farmers, ethanol plants, food companies and consumers.

“The USDA report gives the planting season’s first official peek at how much corn, wheat, soybeans and other grains farmers intend to plant. Traders make investment decisions based on the expected number of planted acres, while farmers use the report to decide which crops might maximize their profits.”

Ms. Etter explained that, “But with stocks of corn and other staple grains lower than they have been in decades, grain markets are anything but stable. Agriculture exports are expected to rise to a record this year as China, India and other foreign nations clamor for grains to eat and to feed livestock. As corn-fueled ethanol production keeps growing, corn used for ethanol will make up more than 30% of the corn crop by next year, up from 14% in 2006. Packaged-food companies are hoping not to have to push further price increases for bread and other staples onto consumers.”

David Gaffen, in an update posted on Friday at the MarketBeat Blog (The Wall Street Journal) stated that, “A Dow Jones Newswires survey of analysts suggests the prospective plantings report will show a 12% increase in soy area to 71.5 million acres and a 5.3% increase in wheat area to 63.6 million acres. But the survey indicates corn planted area will drop 6.7% to 87.3 million acres.

“That might put more pressure on corn prices, which have already been boosted by food and ethanol demand, pinching food processing and manufacturing companies, and contributing to rising food inflation for consumers. As of February, food inflation was up 4.6% on an unadjusted basis from a year earlier, contributing to the recent declines in spending by consumers.”

Angie Pointer, writing recently at Barron’s Online about the USDA’s Prospective Plantings report, noted that, “But a word of caution before declaring the winner of the 2008 U.S. grain grand prix: While Monday’s report will signal what farmers plan to cultivate, analysts warn that weather over the next few months will determine which crop-planting intentions are actually carried out.”

And Joshua Boak reported intoday’s Chicago Tribune that, “With crops at near-record prices and grocery bills rising, the agricultural industry is awaiting the Monday report with bated breath because it will give the best initial glimpse of the nation’s food supplies, and thus represents an early sign of where commodity prices might go.”

Mr. Boak explained that, “The Agriculture Department’s planting survey asks 84,000 producers their intentions, using mail questionnaires, phone follow-ups and personal interviews during the course of two weeks. State field offices then examine the data for about five days, checking for any outliers that might skew results. The Agriculture Department then reviews the survey for another five days before assembling a final draft in lock-up during the wee hours of the morning. It gets released at 7:30 p.m. CDT Monday.”

The Tribune article indicated that, “The private consensus among analysts is that 88 million acres of corn will be planted this year, down from 93.6 million last year. Soybeans should rebound to 72 million acres after falling below 67 million acres. And it is possible that the total acreage farmed could increase.

“Last year, more corn occupied land previously used for soybeans because biorefineries needed it to produce ethanol, the federally mandated additive for motor fuel. On Friday at the Chicago Board of Trade, corn futures priced at $2 a bushel a couple ofyears earlier commanded $5.60.

“High commodity prices are the result of multiple trends. The demand for corn also is spurred by the emerging middle class in China and India splurging on protein-heavy diets, and cattle feed on grain.”

“Analysts note that the March survey serves as a baseline for a more exact plantings report released in June, once the crops are actually in the soil. And outside of the markets, the numbers will be further dissected as meteorologists chart weather conditions,” the article said.

***

In a larger context regarding world supply and demand for a variety of commodities, Bloomberg writers Jiang Jianguo and Feiwen Rong reported on Friday that, “Chinese Premier Wen Jiabao announced more money for farmers and raised government prices for purchases of wheat and rice to boost rural production after inflation accelerated to an 11-year high.

“The government pledged an additional 25.3 billion yuan ($3.6 billion) of subsidies to boost government spending on agriculture to 587.8 billion yuan this year, or 36 percent more than last year, Wen said at a national conference yesterday, according to a statement on the government Web site. It raised purchase prices for wheat and rice by as much as 10 percent.

“Inflation in the world’s fastest-growing major economy soared to 8.7 percent in February when surging food prices were exacerbated by the worst snowstorms in half a century. Pork, a staple food, almost doubled in price in the past year while soybean oil jumped 64 percent, increasing risks to social stability, Jim Rogers, investor and author of ‘Hot Commodities’, said today.

“‘Food prices all over the world are going through the roof and so spread the risk of social unrest,’ Rogers said by phone in Singapore. ‘It doesn’t matter where, everybody has to pay higher prices for food and that’s causing a problem.’”

Keith Bradsher reported in yesterday’s New York Times that, “Rising prices and a growing fear of scarcity have prompted some of the world’s largest rice producers to announce drastic limits on the amount of rice they export.

“The price of rice, a staple in the diets of nearly half the world’s population, has almost doubled on international markets in the last three months. That has pinched the budgets of millions of poor Asians and raised fears of civil unrest.”

The Associated Press reported on Friday that, “Vietnam will cut rice exports by 1 million tons this year as part of the government’s efforts to rein in soaring inflation and ensure food security, the government said Friday.

“‘To stabilize food prices, rice exports this year must not exceed 3.5 million tons,’ Prime Minister Nguyen Tan Dung was quoted as telling a government meeting Thursday.”

Reuters writer Augustine Anthony reported yesterday that, “Pakistan is raising the price it pays to farmers for wheat by nearly 23 percent, Prime Minister Yousaf Raza Gilani said on Saturday, after failing to tempt producers to sell the grain for strategic stocks.

“The government plans to build a 5-million-tonne strategic reserve from the 2007/08 crop, but farmers had rejected the procurement price of 510 rupees ($7.9) per 40 kg as below domestic and international market levels.”

And in the U.S., Philip Brasher reported in today’s Des Moines Register that, “The high prices for milk, grain and other commodities are hitting home at places like the Johnson County Crisis Center food bank in Iowa City.

“More people are struggling to buy food, even with food stamps. But at the same time, donors have cut back on contributions.”

Mr. Brasher explained that, “The cost of feeding a family of four on a low-income budget has jumped nearly 6 percent since February 2007, according to the U.S. Agriculture Department.

“Anti-hunger advocates say the increase in food prices makes it all the more important for Congress to agree on a new farm bill soon and to include increases in nutrition spending, both to raise food stamp benefits and to provide more commodities to food pantries and soup kitchens.”

Keith Good

Doha

Yesterday, President Bush and Prime Minister Kevin Rudd of Australia held a joint press appearance at the White House.

In his opening remarks, President Bush stated that, “We spent a great deal of time talking about the economies. One thing we spent time on is talking about the benefits of trade between our two nations, and the benefits of a world that trades freely and fairly. And the Prime Minister was asking me about my views on Doha. I said it’s possible to achieve a Doha round. He, too, believes we should work to achieve a Doha round. However, I informed him that it’s — we’re willing to make serious concessions on the agricultural front, but we expect other nations to open up their markets on manufacturing, as well as services. And to this end, Prime Minister Rudd — Kevin Rudd said that he would be more than willing to help. And that’s — very grateful.” (Audio clip, MP3-0:50).

And Prime Minister Rudd stated that, “As the President has just indicated, we also spoke about the Doha Round. My own view is that if ever the global economy needs a psychological injection of some confidence in the arm, it’s now, and that can be delivered by apositive outcome on Doha. Takes more than two to tango. Takes a lot of people to tango when it comes to the Doha Round — combination of ourselves and the Cannes Group, the United States, the Europeans, Brazil, India, others. But what we have agreed, again, as strong, long-term supporters of free trade around the world, as one of the best drivers of global economic growth, is to work very closely together in the months ahead to try and get a good, positive outcome for Doha — good for our economy, good for the American economy, good for the global economy.” (Audio clip, MP3-0:56).

Reuters writer Doug Palmer reported yesterday that, “European Union Trade Commissioner Peter Mandelson told reporters in Paris he was encouraged by Bush’s remarks.

“‘It’s about time,’ Mandelson said after meeting with French Prime Minister Francois Fillon.

“‘George Bush says … the United States needs to make fair, reasonable payment into these negotiations,’ Mandelson said. ‘I always said they would. The time has come for this to happen.’”

Mr. Palmer added that, “On Monday, Brazil’s chief Doha negotiatorRobert Azevedo said negotiators were closer than ever to an agreement, but there still was no certainty of success.

“The United States and the EU both face demands to make deep cuts in their agricultural subsidies and tariffs, but want major developing countries such as India and Brazil to open their markets in exchange.

“Negotiators have been working in Geneva toward a possible ministerial-level meeting in April or May, where it is hoped a long-awaited breakthrough would occur.”

An AFP article from yesterday added that, “President George W. Bush said Friday his administration is prepared to make ‘serious concessions’ to help achieve a global trade liberalization pact if other countries reciprocate… [D]eveloping countries have been pressing for greater access to agricultural markets in the industrialized world while wealthier nations are in return seeking better access for their manufactured products.”

In a related item, Dow Jones writer Tom Barkley reported yesterday that, “Completing a successful Doha round of global trade talks is the top U.S. trade priority, the U.S. Trade Representativesaid Friday.

“The yearly National Trade Estimate Report on Foreign Trade Barriers said it is also working with Congress to get free-trade agreements signed with Colombia, Panama and South Korea approved.”

Meanwhile, Reuters writer Jonathan Lynn reported yesterday that, “Major countries in the World Trade Organisation (WTO) hope to resolve a key technical issue in agriculture next week that is holding up progress towards a new global trade deal, diplomats and officials said on Friday.

“Leading food importers such as the European Union and Japan, and exporters such as Australia and Brazil, will get together on Monday to show whether they have agreed on a scheme to allow countries to shield politically sensitive products from the full force of tariff cuts.

“The issue has bedevilled the Doha round of trade talks for months, but after importers and exporters spent the weeks on either side of the Easter holiday crunching numbers there were signs they were ready to move ahead, diplomats said.”

The article added that, “WTO Director-General Pascal Lamy will meet ambassadors from major trading powers and representatives of trading alliances on Tuesday to discuss how a meeting of ministers should be organised, officials and diplomats said.”

Farm Bill

The Bush administration continues to promote reform principles in the current negotiations on the U.S. Farm Bill.

An item posted yesterday at The Mulch Blog pointed to a Talk Radio News Service report from Friday that stated, “Responding to a question on the Farm Bill Stanzel said that the president has said that he wants a Farm Bill that is reform-minded that does not raise taxes. Since farmers are doing very well we think this is a good time to reform our agriculture policies. The president would veto a bill that is not reform-minded, or one that raises spending. Stanzel mentioned that the next deadline is April 18th, instead of relying on extensions the Congress should work to pass new legislation and not extend current law piecemeal.”

DTN Special Correspondent Don Wick reported yesterday (link requires subscription) that, “Meeting with farmers in his home state [North Dakota] for the first time in official capacity, Agriculture Secretary Ed Schafer emphasized the importance of lawmakers settling their funding issues for the farm bill before Congress returns from its Easter recess next week.

“‘We’re pretty confident now that we can come together on those funding sources and if they get that in place by the time they get back, we’ll have a couple weeks to get it wrapped up,’ said Schafer at a forum Friday morning with representatives from about 20 North Dakota farm groups.

“Rep. Earl Pomeroy, D-N.D., also participated in the roundtable discussion and said if the funding concern isn’t resolved by Monday, there will be tremendous pressure to finish the bill early in the week.”

Mr. Wick indicated that, “While funding remains a hurdle, the White House was also seeking policy reforms. Schafer said more work remains on the reform issue. The administration has moved off its demand for a $200,000 adjusted gross income cap for people to continue collecting commodity payments. The administration now supports a $500,000 AGI cap.

“‘That’s not the reform we want, but that’s kind of the realistic deal about getting a bill, and we’re willing to do that,’ said Schafer, ‘However, we have taken the strong stance that any increase in spending now has to come from reform. It can’t come from tax increases. It can’t come from chopping other programs. It has to come from real reform in the farm bill, and we should be able to do that.’”

Jenny Michael reported at the Bismarck Tribune Online today that, “North Dakota farm and ranch group leaders told U.S. Agriculture Secretary Ed Schafer they want a permanent disaster relief program to be included in the 2007 Farm Bill.”

Ms. Michael stated that, “Schafer said the Bush administration is committed to providing reform, a stronger safety net for farmers, and continued growth in trade in the new farm bill, which will last five years.

“A permanent disaster relief program, which has been pushed by farm-state politicians and producers, could be part of that safety net. Such a program would take the place of congressional funding to producers following natural disasters.”

“Schafer said Bush’s OK of the proposed $4 billion program in the $285 billion Farm Bill will depend on how it fits into the finished bill. Such a program could be viewed as a subsidy by the World Trade Organization, which could hurt the United States in trade discussions, he said.”

The Bismarck Tribune article added that, “Also discussed at the roundtable were pending trade agreements, support for beginning farmers, conservation and the sustainability of high market prices.”

With respect to high market prices, USDA’s National Agricultural Statistics Service (NASS) released their monthly Agricultural Prices report yesterday.

In part, the NASS report stated that, “The preliminary All Farm Products Index of Prices Received by Farmers in March, at 150 percent, based on 1990-92=100, increased 3 points (2.0 percent) from February.”

The NASS document also included these illustrative graphical indicators depicting prices received for corn, wheat, soybeans and cotton.

Some farm policy observers have noted that with commodity market prices at such robust levels, reforms regarding direct payments should be considered- particularly since a reform in this area could also free up additional funding for other Farm Bill priorities.

Recall that back on February 27, DTN writer Chris Clayton reported that, “Policymakers and groups that have sought to reshape farm policy are again calling on Congress to reconsider tax changes to fund the farm bill while also paying direct payments to producers during these times of soaring commodity prices.”

Mr. Clayton explained that, “Most farm groups have defended direct payments as a safety net that would be there if hard times return. Others have noted that the payments, which are not tied to actual production, are compliant with World Trade Organization rules. The American Farm Bureau backs keeping direct payments, and the National Association of Wheat Growers wanted an increase in direct payments because, in many cases, direct payments were the only safety net for wheat producers over the past farm bill.”

The February 27 DTN item noted that, “[U.S. Rep. Ron Kind D-Wisconsin] and cohort Rep. Jeff Flake, R-Ariz., have sent a 10-point plan to House Speaker Nancy Pelosi, D-Calif., and other congressmen proposing to rollback any potential changes in target prices or loan rates, as well as reduce direct payments and establish tighter criteria for farmers to receive commodity payments. Given the current commodity markets, the Kind-Flake proposal particularly targets direct payments, which pay $5.2 billion annually to producers and are not tied to market conditions.”

For more perspective, see this FarmPolicy.com audio podcast from February 27 (MP3- 6:00) which features audio clips from Rep. Kind, Rep. Flake, President of the Grocery Manufacturers Association and former U.S. Rep. Cal Dooley, and Ken Cook. The FarmPolicy.com audio podcast lasts six minutes and is available here (MP3).

For a closer look at the distribution of federal direct payments, see this Environmental Working Group webpage.

Meanwhile, David Bennett, in an item posted yesterday at the Delta Farm Press Online, provided a Question and Answer transcript with Senator Blanche Lincoln (D-Ark.) from a conversation the Senator had with the Delta Farm Press on March 20.

Direct payments were a topic that Sen. Lincoln addressed.

According to yesterday’s Delta Farm Press update, Sen. Lincoln stated that, “One (politician) was up here talking about cutting direct payments — that the payments weren’t needed because (ag commodity) prices are so high.

“There was a gentleman in central Arkansas who let us know that he uses the direct payment to buy supplies in the off-season, when prices are cheaper. However, now that (input) prices are going sky-high the direct payment won’t cover as many of those expenses.

“We cut back on the counter-cyclical program. People said, ‘Well, no one will use that.’ Well, they won’t need to since prices are high. But everyone knows that those prices won’t stay high.

“And this is a five or six-year bill. And if there is a big problem (that develops during the bill’s life), farmers need to know there are programs that will be available…

“They need to know that direct payments will be there for them…They need to know that this bill isn’t something just for this year, when prices are high. They need to know the bill is a long-term insurance plan that makes sure we have a safe, abundant, domestically supplied food source, that it provides Americans the kind of food they’ve grown accustomed to and appreciate.”

EU Common Agricultural Policy

Reuters writer Jeremy Smith reported yesterday that, “Latest EU plans for revamping farm policy are headed in the right direction but more attention should be given to developing the countryside, Europe’s former agriculture chief said.

Mr. Smith explained that, “Franz Fischler said a blueprint for the European Union’s latest shake-up of its Common Agricultural Policy (CAP) took a realistic approach towards adapting it for new challenges, given the likely level of resistance.

“‘If I look at what the challenges are, and at how far one can go so that the package is finally accepted by the member states, I think the proposal meets a good balance,’ he told Reuters in an interview late on Thursday.

“Fischler, a former Austrian minister who served two consecutive stints as the EU’s agriculture commissioner from 1995 to 2004, was behind two major reforms of EU farm policy.

“One of his major successes was in 2003 when he persuaded the bloc’s farm ministers to agree to breaking the link between how much subsidy a farmer receives and the amount he produces, a concept known in EU jargon as decoupling.”

The Reuters item added that, “Fischler’s successor, Denmark’s Mariann Fischer Boel, wants to take those ideas further and, in a plan called the ‘health check’ of the CAP, has suggested gradual increases in the amount of compulsory modulation that EU countries should do.

“Fischer Boel has also taken aim at big farms and wants to reduce handouts to larger holdings according to income bracket.

“‘In my view, the health check is okay,’ Fischler said. Referring to the degressive cash capping suggested in the plan, he said: ‘The way the Commission addresses this point in the health check is maybe a very practical solution.’”

For more detail and additional context with respect to EU reform of the Common Agricultural Policy, including the historic reforms sought by Franz Fischler, and an explanation of compulsory modulation, see, this FarmPolicy.com exclusive update from March 21, “‘Analysis From Brussels’ –By Roger Waite – CAP Backgrounder.”

In a separate Reuters article from yesterday, Jeremy Smith reported that, “France hopes to mark its stint as European Union president from July by presenting ambitious ideas on how to reform the bloc’s agricultural policy.

“But some diplomats fear President Nicolas Sarkozy’s suggestions to spur domestic production and make Europe less dependent on imports masks a protectionist stance that does little to change the Common Agricultural Policy (CAP).”

Mr. Smith noted that, “EU diplomats and officials have monitored a stream of rhetoric from Paris that they say suggests a desire to modernise farm policy, but which also hints at old-style protectionism… [D]iplomats say the French president clearly wants to ‘do something’ about the CAP, but they remain to be convinced that anything much will change under the six-month French presidency.”

“‘The most likely outcome is something that will enable the French to say they kicked off the debate on what the CAP should look like,’ one EU diplomat said.”

Keith Good