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.

The House and Senate batted farm bill proposals back and forth last week, squabbling over such familiar sticking points as payment limits, disaster aid and faster depreciation for farm equipment.

The quarreling, though, seems increasingly detached from the monumental changes that are sweeping through American agriculture—from corn replacing cotton in parts of Mississippi, spring wheat contracts hitting $20 a bushel on the Minneapolis Grain Exchange, and empty grain elevators in the Dakotas.

It isn’t entirely the lawmakers’ fault that their labor has been overtaken by events. When they began work on a new farm bill two years ago, the problems were the traditional ones: stagnant commodity prices and flat farm income. Key farm state lawmakers girded themselves for a traditional battle defending traditional subsidies. They’re still waging that fight, but everything has changed, creating a new set of issues and choices.

What’s the best policy for a world in which food and fuel are competing for acres? With corn prices at or near $6 a bushel, should the U.S. be subsidizing both the ethanol industry and corn growers? Does it make sense for Congress to allocate 85 percent of the U.S. sugar market to beet and cane growers when those acres may be needed for corn and wheat? Is it possible to meet global demands for crops without sacrificing habitat, soil and even the climate?

These are big questions, but they haven’t much entered the farm bill debate, now mired in parochial battling.

The impasse has led some to suggest the unthinkable: This could be the last farm bill of its kind, and perhaps even the last farm bill.

That possibility was advanced privately last week by several serious policy analysts and former senior government officials attending Informa Economics, Inc.’s annual conference on food and agriculture policy in Arlington, Va.

Imagine, they suggested, that the current high prices are not just a blip but a permanent new condition, much like high oil prices. In that case, the commodity title of the farm bill will look increasingly irrelevant. Government price guarantees will no longer be operative at their current levels, and the billions of dollars in direct payments to farmers will become politically unsupportable. In place of the 70-year old system of supports and guarantees, Congress will impose a new safety net operated by private crop insurance companies, though still subsidized by the government.

The House Agriculture Committee’s new farm bill version unveiled last week includes an optional program for farmers providing for scaled-back government payments and other benefits, in return for insurance against both low prices and bad weather. Though backed by corn grower organizations, it gets little respect from farm bloc members.

Committee Chairman Collin Peterson told reporters last week he couldn’timagine why many farmers would sign up for it.

Still, this year’s impasse over the farm bill may be a sign that fundamental change can’t be postponed much longer.

The agriculture committees are beginning to lose control of the debate. By refusing to consider shifting some $50 billion in direct farm payments to other priorities, the agriculture committees have had to beg money from Congress’s powerful tax and revenue committees in order to fund other priorities. Those committees are now extracting their pound of flesh.

House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) wants a $9 billion increase in food stamp spending as a condition of his help. Senate Finance Committee Chairman Max Baucus (D-Mont.) is unyielding in his demand for a $4.1 billion disaster program. He is also proposing a tax change that would give his committee jurisdiction over the nation’s principal soil and habitat conservation program.

The “aggies” may yet get the money, but only at the price of relinquishing some power.

Already, energy, environmental and agriculture policy are merging, so that the agriculture committees alone no longer control the destiny of American farmers. The newly-enacted energy bill gives the administrator of the Environmental Protection Agency huge new sway over the farm economy, including authority to waive biofuel requirements deemed to be hurting the environment or consumers.

In the new crops-for-energy economy of the Midwest, oil prices are as significant as wheat futures. And EPA’s global climate model, now in the works, could determine whether future ethanol and biodiesel plants qualify for tax credits and loan guarantees.

At the same time, the environmental policies the government chooses over the next months may have more of an impact on farm revenues than the fate of direct payments and traditional subsidies.

Pressure is increasing from many sides to fight shortages and food inflation by plowing virgin prairie and land now enrolled in the Conservation Reserve.

In the House, Congresswoman Stephanie Herseth Sandlin (D-S.D.) favors a “sod saver” program that would deny crop insurance for four years to farmers expanding into native prairie–prime habitat for pheasant and duck, and a natural grass bank for ranchers.

A bigger question is the fate of the 36 million acre Conservation Reserve, one of the premier environmental success stories of the last two decades.

Authorized acreage would shrink by more than 10 percent under Peterson’s proposal, and could fall even more unless the government raises payments to participating landowners to compete with the rents they can now get from farmers.

Pressure is mounting – from farmers, the baking industry, and agribusiness groups – to allow early withdrawal of land from the Reserve. Agriculture Secretary Ed Schaefer says he sees no need for such drastic action. But contracts on 4.5 million acres will expire next year, and many landowners are expected to return the land to commercial farming without higher payments from the government. (About a quarter of the land in the reserve now was formerly used to grow wheat, and prices of wheat are now at record levels.)

The public is entitled to a debate on the implications of the sweeping changes underway in U.S. and world agriculture. At this point, it looks as if it will have to wait.

***

Clarification: An earlier version of Dan’s article reported that the “sod saver” provision favored by Congresswoman Herseth Sandlin was not included in the new farm bill outline offered last week by Rep. Peterson. A committee spokeswoman said Monday that sod saver had been included in both the House and Senate versions of the legislation and Peterson’s proposal “makes no policy assumptions.” She added that the chairman’s “framework document contains a level of savings that presumes savings that would be achieved by the inclusion of a sod saver provision in the final conference agreement.”

Dan Morgan

A news release issued on Friday by the United Nations Food and Agriculture Organisation (FAO) stated that, “The cereal import bill of the world’s poorest countries is forecast to rise by 56 percent in 2007/2008. This comes after a significant increase of 37 percent in 2006/2007, FAO said today.

“For low-income food-deficit countries in Africa, the cereal bill is projected to increase by 74 percent, according to the UN agency’s latest Crop Prospects and Food Situation report. The increase is due to the sharp rise in international cereal prices, freight rates and oil prices.

“International cereal prices have continued to rise sharply over the past two months, reflecting steady demand and depleted world reserves, the report said. Prices of rice increased the most following the imposition of new export restrictions by major exporting countries. By the end of March prices of wheat and rice were about double their levels of a year earlier, while those of maize were more than one-third higher, according to the report.”

The FAO indicated that, “Foodriots have been reported in Egypt, Cameroon, Cote d’Ivoire, Senegal, Burkina Faso, Ethiopia, Indonesia, Madagascar, the Philippines and Haiti in the past month. In Pakistan and Thailand, army troops have been deployed to avoid seizing of food from the fields and from warehouses.”

To listen to an audio excerpt from FAO Director-General Jacques Diouf regarding food prices, just click here (MP3-2:18).

Reuters writer Robin Pomeroy reported on Friday that, “Food riots in developing countries will spread unless world leaders take major steps to reduce prices for the poor, the head of the United Nations Food and Agriculture Organisation (FAO) said on Friday.

Meanwhile, a Reuters news article from Thursday noted that, “Global investment funds and the weak dollar are largely to blame for high world food prices, a senior official of the United Nation’s Food and Agriculture Organization said on Thursday.

“‘The crisis is a speculative attack and it will last,’ said Jose Graziano, the UN food and farm organization’s regional representative for Latin America and the Caribbean.”

The article indictedthat, “Across the globe foods from bread to milk have become more expensive and in some countries helped fuel inflation. High prices for rice, beans and other food staples provoked food riots in Haiti this week.”

With respect to Haiti, New York Times writer Marc Lacey reported in Sunday’s paper that, “Responding to violent street protests against rising food prices that ground Haiti to a halt over the last week, President René Préval announced subsidies on Saturday that he said would cut the cost of rice by more than 15 percent… Mr. Préval, a former agronomist who is in his second term as president, met earlier in the day with food importers at the presidential palace and emerged to announce new measures that he said would knock the price of a 50-pound bag of rice from $51 to $43, a nearly 16 percent reduction. In the poorest country in the hemisphere, that discount could mean the difference between eating and going hungry for many destitute families.”

Other countries are also taking steps to address commodity and food price concerns; Roel Landingin, writing on Thursday at the Financial Times Online noted that, “The Philippines is mounting anambitious bid to achieve self-sufficiency in rice within three years as a policy of relying on imports to cover production shortfalls unravels amid tightening global supply and soaring world prices.

“The government is hoping the Philippines, the world’s biggest rice importer, will be able to halt imports by 2010 thanks to a spending spree on irrigation and farm support aimed at boosting production.”

The FT article stated that, “The Philippines ‘has realised now it has no other option. Grain prices, like oil, will continue to go up because production cost has also been increasing,’ says Jesus Paras, undersecretary for agriculture.

“President Gloria Macapagal Arroyo last week ordered a big increase in spending to boost rice production, allocating more than 40bn pesos ($960m) a year for construction and repair of irrigation systems, building of farm-to-market roads, distribution of special seeds and additional state lending to farmers.”

Meanwhile, Blaine Harden reported in Saturday’s Washington Post that, “More than anywhere else in Asia, the soaring price of rice has become a good-vs.-evil drama in the Philippines, one of the world’s largest importers of rice.

“Traders who fiddle with the price of the nation’s all-important staple now face life in prison. Police are raiding warehouses in search of hoarders. Soldiers and police have been mobilized to help sell government-subsidized rice to the poor.”

Also with respect to the Philippines, an AFP article from Thursday stated that, “A request to buy low-cost milled wheat from China has been turned down, Favila [Trade Secretary Peter Favila] said, forcing the government to turn to more expensive wheat from the United States.

“‘I am saddened that China did not grant our request and I have already received official communication to that effect. They did not give any reason. They just said the demand in China is also large,’ the secretary said.

“Even noodles, which come from imported wheat will likely be affected as well, he warned.”

Javier Blas, also writing on Thursday at the FT Online, indicated that, “For the past 40 years, consumers have had the upper-hand in the global rice market, which has witnessed a steady decline in prices, interrupted only by the brief spike in 1973-74 triggered by the first oil crisis.

“The structural decline in prices was the result of the Green Revolution, the agronomics movement that spread the use of irrigation, fertiliser and high-yielding varieties of rice in Asia in the late 1960s and led to bumper crops.”

The FT article explained that, “A combination of factors have led to prices rising. Consumption in Asia, the Middle East and West Africa is booming, thanks to rising per capita income (which allows more people to enjoy three meals a day instead of just one or two); poor supplies due to a reduction in acreage devoted to the crop; rising costs of fuel and fertilisers; and the exhaustion of technological advances that contributed to a surge in rice yields in the past.

“Water shortages in southeast Asia, Central America and West Africa have also contributed to a slowdown in production growth, while higher labour cost in countries such as Vietnam as more people move to cities have increased production cost significantly, experts say. Demand has outstripped production in six of the past eight years and global rice stocks have fallen to their lowest level since 1976.”

And, in a separate article posted on Thursday at the FT Online, Javier Blas reported that, “Governments are racing to strike secretive barter and bilateral agreements with food-exporting countries to secure scarce supplies as the price of agricultural commodities jump to record highs, diplomats and cereal traders say.

“The moves coincide with a significant tightening of the global food market as leading exporters of agricultural commodities ban foreign sales. The government-to-government contracts could bypass those restrictions, diplomats say.”

This FT article went on to report that, “Leading rice, wheat and soyabean exporters such as Argentina, Vietnam and Russia have restricted their foreign sales, triggering concerns among importing countries about food supply security.

“Cereals traders say India has held talks with Kazakhstan to secure a bilateral contract for wheat, after New Delhi was forced to import the grain in the past two years, but added that it was unclear if any deal had been signed.

“The move towards bilateral agriculture contracts marks a policy U-turn as such deals were gradually abandoned in the 1990s as countries started to rely on the international food market for their supplies, abandoning previous policies of self-sufficiency.

“Analysts say that while bilateral agreements could help secure supplies, prices are likely to be at market prices rather than discount levels. Diplomats say Russia, Ukraine and Kazakhstan have been particularly involved in striking bilateral agreements as a way to expand their market share.”

Louise Lucas reported at the FT Online on Friday that, “It is hard to over-estimate the impact of higher food prices in Asia. Food accounts for a far bigger portion of shopping baskets in the region’s largely developing economies than in the West. According to the Asian Development Bank, food comprises 59 per cent of the consumer price index weights in Bangladesh; 57 per cent in India; 55 per cent in the Philippines; 40 per cent in China and 42 per cent in Vietnam.

“Hence the shopping list of palliatives. Dealing with the root causes is harder in the short-term. Higher prices reflect supply constraints which are only partially explained by the weather.

“Instead, supply shortages result from smaller tracts of arable land. That is partly to do with urbanisation, as well as the global trend to replace food crops with those used for biofuels. In Asia’s case, more land has also been given to live-stock to meet the emerging middle classes’ desire for more meat at mealtimes.”

With respect to issues associated with biofuels, the Associated Press reported on Thursday that, “Brazil’s president insisted Thursday that crops used for ethanol are not responsible for driving up food prices, and said Haiti - where food riots have erupted recently - could benefit from a biofuel industry.

“Luiz Inacio Lula da Silva was speaking after meeting Dutch Prime Minister Jan Peter Balkenende at the start of a two-day state visit during which he hopes to boost Dutch investment in Brazil’s biofuel industry.

“Ministers from both countries were signing an agreement to intensify cooperation on biofuels Friday.”

The AP article indicated that, “Ethanol production ‘can be the hope for a development model for many countries, particularly in Africa, Latin America and Asia,’ Silva told reporters.

“‘Just look at Haiti today. We can see how many benefits we can take to Haiti if rich and emerging countries like Brazil can make partnerships to invest in third countries and produce (biofuels) there,’ he said.

“Brazil, which claims to be the world’s main producer of ethanol from sugar cane, wants ethanol included in a U.S.-EU plan within the World Trade Organization to cut import taxes on climate-friendly products such as solar panels and wind turbines.”

Later, the AP article noted that, “Silva said food prices are rising because more of the world’s poor are earning enough to buy more and better food, and because people are living longer.

“‘There is … no relation with biofuels,’ he said.”

Doha Link

In a related article from Friday regarding food prices (“What will Doha really do for world food prices?”), Reuters writer Missy Ryan reported that, “A new world trade deal, more than six years in the making, finally appears to be within reach, but it may not ease raging global food costs that have protesters pouring into the streets from Egypt to Haiti.

“On the contrary, many experts expect a new global pact would actually lift food prices slightly, at least at first.”

Later, the article indicated that, “Arguing a deal may ease the price crunch is a novel approach for advocates of the Doha round. For years, they said freer trade would help developing nations boost prices for farm exports, in part by cutting price-depressing subsidies in wealthy nations.”

Ms. Ryan stated that, “Economists have long predicted that a new world trade deal would lift commodity and food prices by a small increment — a couple of percentage points globally for most products, and a bit more for milk, oilseeds or paddy rice.

“Yet they also caution that the benefits of a Doha deal depend on where you sit. It’s good for net exporters of food commodities, like Brazil, Vietnam, or the United States, and bad for those that rely on food imports.”

The article reported that, “A recent paper by World Bank economists showed that rising food prices from 2005 to 2007, while differing from place to place, generally deepened poverty in developing countries.

“Hardest hit were countries like Nicaragua, where large urban populations saw incomes eaten away at by higher costs.

“‘There was always concern about net food importing countries,’ said David Orden, an agricultural economist at the International Food Policy Research Institute.”

Ms. Ryan noted that, “Many Doha supporters say booming prices may make it easier for wealthy nations like the United States to cut farm subsidies and help negotiators win passage for a deal.

“‘It’s so painless,’ said Charlotte Hebebrand, chief executive of the International Food and Agricultural Trade Policy Council in Washington.

“‘All of these commitments are so much simpler than they were a few years ago. Let’s get it done,’ Hebebrand chided.

“But U.S. negotiators, who must answer to Congress and, in turn, a powerful agriculture lobby, may be reluctant to commit to cuts that would stick if prices weaken.

“As the U.S. Congress has been negotiating a new farm law, many farm-state lawmakers been unwilling to accept major cuts to crop supports, saying their constituents need a safety net in case the current boom evaporate.”

Concluding, the Reuters article stated that, “‘Today’s prices are another warning call that we need a good, open agricultural trading system that gets food produced efficiently and distributed efficiently,’ Orden [David Orden, an agricultural economist at the International Food Policy Research Institute said.”

U.S. Food Prices

A Congressional Research Service Report from Thursday (“Food Price Inflation: Causes and Impacts”- by Tom Capehart and Joe Richardson) stated that, “U.S. food prices rose 4% in 2007 and are expected to gain 3.5% to 4.5% in 2008. Higher farm commodity prices and energy costs are the leading factors behind higher food prices. Farm commodity prices have surged because (1) demand for corn for ethanol is competing with food and feed for acreage; (2) global food grain and oilseed supplies are low due to poor harvests; (3) the weak dollar has increased U.S. exports; (4) rising incomes in large, rapidly emerging economies have changed eating habits; and (5) input costs have increased. Higher energy costs increase transportation, processing, and retail costs.

“Although the cost of commodities such as corn or wheat are a small part of the final retail price of most food products, they have risen enough to have an impact on retail prices. Generally, price changes at the farm level have a diminished impact on retail prices, especially for highly processed products.

“The impact of higher food prices on U.S. households varies according to income. Lower-income households spend a greater portion of their income on food and feel price hikes more acutely than high-income families. Higher food costs impact domestic food assistance efforts in numerous ways depending on whether benefits are indexed, enrollments are limited, or additional funds are made available. Higher food and transportation costs also reduce the impact of U.S. contributions of food aid under current budget constraints.”

“Harvesting Cash” Revisited

An update posted on Friday at The Washington Post Online stated that: “The Post’s investigation into farm subsidies, a series of stories that ran in 2006 and 2007, is the focus of a PBS documentary airing tonight. The program, ‘Expose: America’s Investigative Reports,’ follows the Post’s Sarah Cohen, Gilbert M. Gaul and Dan Morgan, who explain how they found more than $15 billion in wasteful, unnecessary spending.

“The program will air as part of Bill Moyers Journal and will look specifically at two elements of the Post’s stories, the finding that $1.3 billion was paid in farm subsidies to land owners who had grown nothing and $635 million in drought payments to farmers who had experienced moderate or no drought.

“The program can also be viewed on the website for ‘Expose: America’s Investigative Reports.’”

Keith Good

At the conclusion of the funding background is a summary of more recent developments.

Farm Bill Funding Background

* February 12- David Rogers reported at Politico.com that, “Trying to salvage stalled farm bill negotiations, House Agriculture Committee Chairman Collin Peterson outlined a 10-year-plan that would impose tighter payment limits on crop subsidies and pare back demands for added revenues to meet the cost of the legislation.

“Peterson, who caucused with Republicans and Democrats on his panel Tuesday night, said later he would set a revenue target of about $6 billion or roughly half the $11 billion to $12 billion level still being sought by senators.”

* February 13- Congressional Quarterly reported that, “In an effort to win White House support for a new version of the farm bill, House lawmakers are proposing to reduce the measure’s agriculture subsidies as well as the tax revenue designed to pay for them.

“The changes are outlined in a new plan drafted by Collin C. Peterson, D-Minn., the Agriculture Committee chairman, and Robert W. Goodlatte of Virginia, the panel’s ranking Republican.”

The CQ article noted that, “Most of the money saved under the bill — about $6.5 billion — would come from changes to commodity-crop programs.

“Specifically, farmers would not get direct payments, which are paid annually based on what they grow and their total acreage, during the ninth year of the bill’s 10-year projections. The move would result in about $5.2 billion less in spending, according to the draft bill.”

* February 14- The Peterson-Goodlatte framework proposal was made available; and, Reuters writer Charles Abbott reported that, “The Bush administration says it can accept a spending increase of $6 billion over 10 years. Leaders of the House Agriculture Committee assembled a farm bill ‘framework’ to show that good policy can be written at that level, which is sharply less of an increase than Congress has proposed.”

DTN writer Chris Clayton reported (2.14) that, “Major commodity and agriculture groups banded together Thursday to argue that a spending plan for the farm bill takes too much money away from farmers and shifts those dollars to other parts of the farm bill.

“A letter to the chairmen and ranking members of the House and Senate Agriculture Committees said a new plan offered Wednesday by the House Agriculture Committee was ‘seriously under-funded’ and proposed cuts to the commodity programs were ‘excessive.’”

* February 15- DTN Political Correspondent Jerry Hagstrom reported that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, and ranking member Saxby Chambliss, R-Ga., today sent the House Agriculture Committee a farm bill conference proposal for a five-year bill that would spend $12.3 billion over the current baseline over a 10-year period.”

(Note: related press release available here; letter from Senators Harkin and Chambliss to Ag Committee Chairman Collin Peterson (D-Minn.) and Ranking Member Robert Goodlatte (R-Virginia) is available here.)

“On Tuesday the House Agriculture Committee, after consultation with the Bush administration, proposed a 10-year farm bill with $6 billion in spending over the baseline. Farm groups had said the farm bill needs to spend $12.5 billion over the baseline over 10 years to avoid cutting farm subsidiesto pay for other parts of the bill.”

* February 18- Peter Shinn of Brownfield reported that, “The Senate Agriculture Committee on Friday issued a counter-offer on the farm bill. The Senate version spends about $12.3 billion dollars more than allowed by last year’s Congressional Budget Office baseline for ag programs. The House Ag Committee’s farm bill offer last week was a comparatively modest $6 billion dollars over budget baseline. The White House has called the Senate’s offer a non-starter, largely because it still requires raising revenue to fund the legislation.”

* February 21- DTN Political Correspondent Jerry Hagstrom reported that, “Key House and Senate agriculture leaders are putting the final touches on an agreement for a new farm bill that would cost $9 billion over the current baseline over a 10-year period, with a separate deal for a permanent farm disaster aid program, DTN has learned.”

Mr. Hagstrom added that, “The Capitol Hill source said that [House Agriculture Committee Chairman Collin] Peterson [D-Minn.], House Agriculture Committee ranking member Bob Goodlatte, R-Va.; Senate Agriculture Committee Chairman Tom Harkin, D-Iowa; Senate Agriculture Committee ranking member Saxby Chambliss, R-Ga.; Senate Budget Committee Chairman KentConrad, D-N.D.; and Senate Finance Committee Chairman Max Baucus, D-Mont., have all been involved in a ‘group’ effort to write the document and that a deal could be announced as early as Friday; however, because other members are difficult to reach during the congressional break, it might not be finalized until next week. The source said the exact amount of the increase for food stamps and other nutrition programs is still under discussion and will be somewhere between the House- and Senate-passed bills.”

* February 25- Philip Brasher noted at The Des Moines Register’s Cash Crops blog that, “Lawmakers are working toward reaching a deal this week on a spending limit for the farm bill, likely about $9 billion over the cost of existing programs…. Kate Cyrul, a spokeswoman for the Senate Agriculture Committee, said ‘we’re hoping that there will be some movement this week.’”

* February 26- DTN writer Chris Clayton reported that, “Congressional tax-writing committees will work to come to terms by the end of the week on provisions to add about $10 billion in spending to the farm bill, House Agriculture Committee Chairman Collin Peterson, D-Minn., said Tuesday evening.

“An agreement to bring this farm bill to conclusion was one of the main goals of a meeting between agriculture and tax-writing committee leaders and top Democratic Congressional leaders Tuesday night. Besides finding a cost figure that members of Congress could agree upon, lawmakers have to find a way to pay for added expense which appeals to the House and Senate, and then can be sold to the White House.”

* March 3- Peter Shinn reported at Brownfield that, “And according to [House Ag Committee Chairman Collin Peterson], another piece of the farm bill puzzle has fallen into place. On Saturday, Peterson said USDA sent him a detailed, written farm bill counter-offer that agrees to spend $10 billion over the Congressional Budget Office baseline for farm programs and also included a list of acceptable budget offsets.

“But Peterson also said some of those proposed budget offsets from the Bush administration include items like lowering Medicare reimbursements for those on oxygen. And, Peterson added, the Bush administration’s farm bill counter-offer also contains a long list of so-called reforms that it says are non-negotiable. Peterson said that list of non-negotiable reforms includes, among many other things, inclusion of a revenue based counter-cyclical program with recourse loans, elimination of the sugar-to-ethanol program, ending the prohibition of planting fruits and vegetables on program crop acres and setting aside 25% of emergency international food aid funds under PL-480 for cash purchases of local commodities in the countries receiving U.S. food aid.”

* March 5- DTN Political Correspondent Jerry Hagstrom reported that, “Democratic and Republican members of the Senate Finance Committee who are also farm bill conferees have agreed on a $12 billion package of farm bill offsets to offer the House and the Bush administration, a key Senate source said Wednesday.

“The package would involve $8 billion in spending cuts and $4 billion in provisions that would increase revenue. House and Senate farm leaders and the Bush administration have agreed to a $10 billion increase over the farm bill baseline over 10 years and it is unclear how a $12 billion finance package would fit with that $10 billion plan.

“The Bush administration has reacted positively to the spending cuts, but negatively to the revenue raisers, the source said.”

* March 10- DTN Political Correspondent Jerry Hagstrom reported that, “The chairman of the House Agriculture Committee said Monday that progress on the farm bill is being complicated by senators’ attempts to turn it into a tax bill and by the difficulties in writing a permanent disaster program.”

* March 12- Congressional Quarterly reported that, “The Senate on Wednesday passed a 30-day extension of the nation’s farm law to give bicameral negotiators more time to hammer out a deal on a long-term agriculture policy overhaul.”

* March 13- “If a final agreement is not reached by April 18, I call on Congress to extend current law for at least one year,” President Bush said in a statement.

* March 17- Jerry Hagstrom writing at AgWeek.com, reported that, “Congress left town March 14 for a two-week spring recess, but congressional leaders agreed to continue work on a bill that would add $10 billion over 10 years to a bill that already costs $597 billion.”

* March 18- DTN writer Chris Clayton reported that, “A framework agreement on how to divvy up $10 billion in extra funding for the farm bill may be ‘dead on arrival’ because itwould drastically cut proposed funds to create a permanent disaster plan for farmers.

“Demonstrating the inner-fighting going on with these talks, Senate Finance Committee Chairman Max Baucus, D-Mont., issued an angry statement Tuesday afternoon after learning the House and Senate Agriculture Committees would attempt to cut proposed funding for a permanent disaster program from $5.1 billion to $2.2 billion over a five-year span. Baucus said he opposes ‘slashing’ the disaster package.”

* March 27- DTN writers Jerry Hagstrom and Chris Clayton reported that, “Senate Budget Committee Chairman Kent Conrad, D-N.D., told DTN on Thursday he would be satisfied with a $4.05 billion farm disaster program that farm bill negotiators appear likely to add to the new farm bill.

“Last week Conrad was among those who said a plan to provide only $2.24 billion for disaster aid was ‘unacceptable.’

“The new allocation for disaster aid was revealed in a new farm-bill framework agreement that DTN obtained on Thursday. According to the document, the chairmen and ranking members of the House and Senate agriculture committees are considering a new framework agreement under which the money for the new weather-related disaster aid program would rise to $4.05 billion, while the increases for conservation, specialtycrops and energy programs would be lower than in the proposal crafted last week.”

* March 28- Congressional Quarterly writer Catharine Richert 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.”

* April 1- Reuters writer Charles Abbott reported that, “Lawmakers need to put more reforms into the new U.S. farm law, the chairman of the House tax committee said on Tuesday, suggesting more money for federal anti-hunger programs.

“‘Our farm bill is not the most popular legislation,’ chairman Charles Rangel of the House Ways and Means Committee said after meeting his Senate counterpart to discuss ways to pay for a $10 billion spending increase for the new law.”

* April 3- Philip Brasher, writing at The Des Moines Register’s Cash Crops Blog, explained that, “The biggest sticking points on the farm bill have come to down to how much money to put into farm disaster assistance and to food stamps and other nutrition programs.

“That’s the word today from Senate agriculture chairman Tom Harkin.

“The disaster program is a must for two powerful Democrats: Kent Conrad of North Dakota and the chairman of the Senate Finance Committee, Max Baucus of Montana. Conrad is chairman of the Senate Budget Committee and is a member of both the finance and agriculture committees.”

Mr. Brasher noted that, “At the same time, Senate Republicans are resisting any cuts to the annual fixed payments that go to grain and cotton farmers.”

* April 8- Philip Brasher, writing at The Des Moines Register’s Cash Crops Blog, pointed out that, “The chairmen of the House and Senate agriculture committees say the biggest hangup on the farm bill continues to be the dispute over how to fund it and comply with pay-as-you-go budget rules.

“‘The biggest problem we’re facing is the issue of offsets,’ said Rep. Collin Peterson, the House agriculture chairman.

“Peterson and his Senate counterpart, Tom Harkin of Iowa, said the funding issue is the problem of the House and Senate tax-writing committees.”

* April 9- Bill Tomson reported that, “The U.S. House of Representatives Wednesday appointed conferees to work with senators to create a unified farm bill, laying down a blueprint for agricultural and nutrition policy for five years.” (For a list of the House conferees, see this House Ag Committee press release).

Mr. Tomson added that, “The House, in a 400-to-11 vote Wednesday evening, approved a non-binding ‘motion to instruct’ farm bill conferees not to use tax measures to fund the 2008 farm bill,” the article said.

“For more on this “motion to instruct,” see this press release issued on Wednesday by Agriculture Ranking Member Bob Goodlatte (R-Virginia).”

* April 10- Chris Clayton, writing at the DTN Ag Policy Blog, indicated that, “The long-awaited first public conference meeting on the farm bill will happen Thursday morning at the Capitol.

“It comes as the House came together on a bi-partisan agreement to spend $6 billion above the baseline on the farm bill and do it without any tax increases. House Democratic and Republican leadership apparently have agreed to the approach.

“What’s effectively left out? The $4 billion permanent disaster program, along with a bevy of tax cuts in the Senate farm bill that range from tax cuts for the Conservation Reserve Program to accelerated depreciation for race horses and a capital-gains deduction for the timber industry. There were more than 60 such measures in the Senate farm bill.

“The lack of negotiating progress between Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Charles Rangel, D-N.Y., led to the decision to move ahead with the House proposal.”

Recent Developments

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “Senate farm bill conferees Friday afternoon finalized an offer to the House of Representatives of a $12.5 billion package that would increase spending in the farm bill by $10 billion over 10 years. The legislation includes a new disaster aid program and provides $2.5 billion in agricultural tax breaks. [Note: Related press release available here, funding details available here].

“Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, also scheduled a conference between the House and the Senate at 3:30 p.m on Monday in Washington.”

Mr. Hagstrom explained that, “Senate conferees want to use different offsets than the credit-card reporting requirement the House offered. Under pay-as-you-go rules in the House, spending cannot be increased unless it is cut somewhere else or government revenue is raised.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., made a $5.5 billion offer without the disaster aid and tax package, but Senate Finance Committee Chairman Max Baucus, D-Mont., and Senate Finance Committee ranking member Charles Grassley, R-Iowa, said the House offer was unacceptable. ‘Chairman Baucus wants the agreement that Chairman Peterson sat in a room and made with him,’ a Baucus aide said, referring to a February meeting at which Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, House Ways and Means Chairman Charles Rangel, D-N.Y., Peterson and Baucus had agreed to a $10 billion farm bill package and offsets.”

Yesterday’s DTN article also noted that, “Agriculture Deputy Secretary Chuck Conner told reporters Thursday that the White House would not support the House’s plan to use of increased government revenue from improved reporting of credit card sales. Baucus said he believes his offsets ‘will be more popular with the White House and the country.’”

Peter Shinn & Bob Meyer reported yesterday at Brownfield that, “The Senate counter-offer is for $10 dollars over budget baseline with a $4 billion permanent ag disaster aid fund and includes the controversial $2.5 billion in Senate tax breaks. That means it takes $12.5 billion in offsets to pay for it.

“A joint press release from Senate Ag Committee Chairman Tom Harkin of Iowa and Senate Finance Committee Chairman Max Baucus of Montana reminded House conferees that all had agreed to a $10 billion-over-budget-baseline approach to the new farm bill back in February. And Baucus addedthat ‘in farm country, a handshake is your word.’

“In a statement issued Friday evening, House Ag Committee Chairman Collin Peterson said, ‘The Senate’s Farm Bill counter-offer today affirms the House position on the core Farm Bill policies and shows how close we are to an agreement on those issues but also demonstrates that there is still work to do on financing the bill and other extraneous issues.’ Peterson specifically takes issue with, ‘$2.5 billion in tax giveaways that don’t even belong in the Farm Bill.’”

Keith Good

“‘The House appointment of farm bill conferees brings together a diverse group of Representatives with strong leadership qualities and expertise across the full farm bill spectrum,’ said Harkin. ‘They will complement the existing list of Senate conferees and will work well to identify a final bill that fits our country’s needs, with strong farm income protection as well as investments in nutrition, conservation and renewable energy.’”

Yesterday morning, DTN Political Correspondent Jerry Hagstrom reported that, “Senate Agriculture Chairman Tom Harkin has scheduled a conference on the farm bill Thursday morning, less than 24 hours after appointment of House conferees on the bill and an extraordinary Wednesday evening meeting of key negotiators.

“House leaders were believed to have presented Senate leaders with a proposal to cut the increase in the farm bill from $10 billion to $6 billion and to leave out the Senate bill provisions for a $4.1 billion farm disaster aid package and 60-plus tax breaks that would cost $2.5 billion.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., House Ways and Means Committee Chairman Charles Rangel, D-N.Y., Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, and Senate Finance Committee Chairman Max Baucus, D-Mont., met with House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., in Pelosi’s office for more than an hour Wednesday evening. All the leaders but Rangel avoided the press after the meeting. Rangel said, ‘We’re going to follow the constitutional procedure and go into conference.’”

Mr. Hagstrom added that, “Lobbyists and Republican members provided some details of the proposal the House was expected to have made to the Senate. House Agriculture Committee ranking member Bob Goodlatte, R-Va., said he, Peterson, Rangel, Pelosi and House Minority Leader John Boehner, R-Ohio, had all signed off on a proposal including offsets for the $6 billion increase to be made to the Senate. Lobbyists said the deal includedleaving out the weather-related farm disaster package that Baucus and Senate Budget Chairman Kent Conrad, D-N.D., have championed and the $2.5 billion in tax breaks in the Senate bill. But Rep. Jerry Moran, R-Kan., characterized the proposal as concluding the traditional farm issues that are under the control of the agriculture committees and leaving the disaster aid and tax break elements to the Finance and Ways and Means committees. Baucus was expected to oppose the package and the decision of the negotiators to depart without speaking to the media could be interpreted as an attempt to work out differences over night.

“Lobbyists said the White House was not thrilled with the proposed offsets, but would not oppose them.”

Chris Clayton, writing yesterday at the DTN Ag Policy Blog, indicated that, “The long-awaited first public conference meeting on the farm bill will happen Thursday morning at the Capitol.

“It comes as the House came together on a bi-partisan agreement to spend $6 billion above the baseline on the farm bill and do it without any tax increases. House Democratic and Republican leadership apparently have agreed to the approach.

“What’s effectively left out? The $4 billion permanent disaster program, along with a bevy of tax cuts in the Senate farm bill that range from tax cuts for the Conservation Reserve Program to accelerated depreciation for race horses and a capital-gains deduction for the timber industry. There were more than 60 such measures in the Senate farm bill. 
The lack of negotiating progress between Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Charles Rangel, D-N.Y., led to the decision to move ahead with the House proposal.

“Effectively, the Senate, with all of its chiefs and lack of navigation skills, again appears to be getting outplayed by the House leadership that wants to get something done.”

A copy of the House spending framework that was presented to conferees at yesterday’s Farm Bill conference meeting was posted yesterday at the House Ag Committee Online- just click here to view this spending framework.

Mr. Clayton noted that, “The House also put a damper on ways the farm bill will be funded. In a 400-11 vote, the House agreed that the farm bill will not be funded by any tax increases. House members are now on the record that they won’t be paying for the bill with new taxes.”

In a public affairs program yesterday, Senator Chuck Grassley (R-Iowa), the Ranking Member on the Senate Finance Committee discussed the Farm Bill and the first meeting of conferees; to listen to his perspective on Finance Committee funding offered in response to a reporters question, just click here (MP3- 2:27).

Congressional Quarterly reported yesterday that, “House and Senate conferees met briefly Thursday to begin hammering out a final version of the long-delayed farm bill.

“The conference began a day after a new bipartisan deal backed by House leaders cleared the way for that chamber to name its conferees. It will resume next week.

“Significant differences remain with the Senate version of the bill, but lawmakers said agreement on a final package that could pass both chambers was near.

“‘The promised land is in sight,’ said Saxby Chambliss of Georgia, ranking Republican on the Senate Agriculture Committee.”

The CQ item also noted that, “Sen. Kent Conrad, D-N.D., a backer of the disaster fund, said Senate conferees will hang together to reject the House proposal. They will counterwith a proposal to spend $10 billion beyond the baseline, financed in part with new customs and users fees.”

And Dow Jones News writer Bill Tomson reported yesterday that, “Agriculture leaders in the U.S. House of Representatives unveiled a new farm bill proposal during a meeting Thursday with their Senate counterparts on a conference committee tasked with forming unified legislation over the next several days.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., told reporters that he expects Senate conferees to take the next few days to scrutinize the proposal and perhaps make a counter proposal as early as Monday.”

Mr. Tomson indicated that, “The new House plan would go $5.5 billion over the farm bill budget, a sharp drop from the $10-billion-over figure that senators have been planning, but Peterson said he did not want to include a controversial $4 billion farm disaster program.

“Senators have entwined the disaster program - a fund sought for farmers that get hit hard by natural calamities - with a $2.5 billion package of tax credits not related to agriculture issues, he said.

“‘They’re the ones that tied this together,’ Peterson said about the disaster program, ‘and they’re the ones that are going to have to untangle it.’”

The Dow Jones article added that, “The new House plan ignores the U.S. Department of Agriculture’s request that farmers with more than an adjusted gross income of $500,000 be denied subsidy payments. Instead, the Peterson-Goodlatte proposal stipulates that only farmers with a $500,000 AGI in non-farm income - outside agriculture-related income - be denied.

“Furthermore, Peterson and Goodlatte refused to remove a provision to protect U.S. sugar farmers from imports by guaranteeing them 85% of the domestic food market. The USDA would be forced to buy up sugar surpluses and sell it to ethanol refiners, which administration officials adamantly oppose.

“The new House plan does not depend on the tax measures that have, in the past, provoked veto threats from the White House, but it does contain one previously un-debated revenue raiser that the administration had hoped to use to help cut the federal deficit.

“House farm bill conferees hope to use a ‘credit card compliance measure’ straight from Bush’s budget proposal to fund $5.5 billion in over-budget spending.”

Meanwhile, DTN writer Chris Clayton reported yesterday that, “Stalemate continued in farm bill negotiations even as congressmen and senators held their first formal conference talks Thursday.

“House negotiators offered a new framework for funding the farm bill that would spend $5.5 billion above the baseline for the bill, but would eliminate the $4 billion permanent disaster fund as well as a myriad of tax credits in the Senate bill.

“But Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, told conferees that the Senate would hold the line waiting for $10 billion they were promised earlier. After an hour of talks, the meeting ended with a suggestion the conference could meet again sometime early next week.

“Meanwhile, a top USDA official further complicated the issue by saying the Bush administration likely would not accept the funding mechanism the congressmen proposed to pay for their offset.”

Mr. Clayton went on to explain that, “Chuck Conner, deputy secretary of USDA, reviewed the one-page House framework and said afterward that the credit-card proposal was not acceptable as an offset, nor would other tax-compliance funding measures be considered acceptable for the farm bill. Administration officials put forward a variety of measures about a month ago they considered acceptable for farm-bill offsets and the credit card measure was not included.

“‘We have been very clear about that for the last six weeks and that remains our position,’ Conner said. ‘So based on what I have seen on that one sheet of paper, the administration would not support coming up with $5.5 billion in new revenues to offset the farm bill.’”

Later, the DTN article added that, “Conner also was asked if the administration would consider a cut at this time in direct payments. Conner repeated the administration’s position that direct payments are not viewed as trade distorting by the World Trade Organization and remain a good support tool for farmers. Direct payments have continued to be questioned because of the high market prices for commodities.” [Note: For more on the Bush administration’s perspective on direct payments, see pages 14 and 15 of their Farm Bill proposal.]

“‘Our proposals included a lot of reforms to those other titles and we used some of the money that we saved in those reforms to actually increase direct payments,’ Conner said. ‘We still think that’s good policy, very good policy.’”

Also with respect to executive branch perspective on the Farm Bill negotiations, Associated Press writer Mary Clare Jalonick reported this morning that, “Agriculture Secretary Ed Schafer said Thursday he is not optimistic Congress can complete a farm bill before the current law expires next week.

“A program to pay farmers for ruined crops and a slew of controversial tax breaks are holding up the legislation, which would expand the nation’s agricultural and nutrition programs.

“‘They’ve been at it for two years and we are down to the last days and we don’t have anything solved,’ Schafer said. ‘That doesn’t give me a lot of optimism that they can get it done.’”

To listen to brief comments from Sec. Schafer made yesterday on the Farm Bill, see this audio clip (MP3- 0:59) from Gary Crawford (USDA Radio), as well as this clip (MP3- 0:22, USDA) on a potential extension.

Ms. Jalonick noted that, “The two chambers began formal negotiations on Thursday after House Speaker Nancy Pelosi named House conferees. She and Senate Majority Leader Harry Reid, D-Nev., met with the bill’s key negotiators Wednesday, but the lawmakers were unable to agree on a way to move forward on the bill.

“Members of the Senate have objected to a new House proposal that would add $5.5 billion to the total and eliminate the disaster program and the tax breaks.

“In earlier meetings, lawmakers from the two chambers had agreed to add $10 billion, including the disaster program. More recently, lawmakers agreed to designate at least $4 billion of that extra money for disaster aid.

“One of the disaster program’s biggest proponents is Senate Finance Committee Chairman Max Baucus of Montana, who wrote it into the bill. Baucus, who is up for re-election this year, has championed the idea back home, where a years-long drought has destroyed many farmers’ crops.”

[Note: for additional background on disaster payments, see this analysis from the Environmental Working Group (EWG), which indicated that, “Plans for a permanent trust fund to compensate farmers and ranchers for weather-related losses will send even more agricultural subsidies to the very regions that already receive the lion’s share. Based on their historical share of ad hoc disaster spending, of the twenty states represented on the Senate Finance Committee, just four stand to gain over half (55 percent) of the committee’s allocation of disaster aid expenditures under a permanent fund: North Dakota, Kansas, Iowa and Montana.”

The EWG analysis also included this map, and noted that, “Within the states where farm disaster payments are routine are tens of thousands of farmers who have collected themevery other year, or more frequently, over two decades.”]

David Rogers, writing yesterday at Politico.com, reported that, “House farm bill negotiators outlined Thursday a bipartisan compromise that jettisons Senate disaster aid funds but promises to have enough Republican support that it could overcome any future veto by President Bush.

“‘If the White House is stupid enough to veto this, they’re going to get overridden,’ House Agriculture Committee Chairman Collin Peterson (D-Minn.) told Politico. ‘That’s where we’re at right now.’

“‘I told [Agriculture Secretary Ed] Schafer, they aren’t just being unreasonable, they’re going to be totally irrelevant. This is the big thing that has happened here in these last few days.’”

Mr. Rogers explained that, “The streamlined House package promises new money for food stamps, fruit and vegetable growers and conservation programs, but drops all of about $4.05 billion previously allocated for a disaster aid trust fund championed by Senate Finance Committee Chairman Max Baucus (D-Mont.) and other Great Plains colleagues.

“Lost as well would be a $2.5 billion package of tax cuts which the Senate Finance panel had hoped to preserve but which have met resistance in the House from Republican and Democratic tax writers. Many are related to agriculture and Western land management and timber issues, as well as a $489 million capital gains and depreciation tax break for the thoroughbred industry.”

The Politico.com article noted that, “Senate Agriculture Committee Chairman Tom Harkin (D-Iowa), who has fought with Baucus for months, appeared to have some sympathy for the House approach. Bringing along the Finance chairman won’t be easy, but the new House position could force both the Senate and White House to reexamine their own stands.

“While opposing even modest tax receipts, for example, the administration has refused to endorse any savings from costly direct payments to farmers — an annual expenditure of over $5 billion. ‘We like direct payments, they don’t cause trade distortion,’ Conner said Thursday. But at a time of record crop prices, the system has provoked increasing public ridicule.

“By the same token, the Senate pressure to provide more for disaster aid could force a final confrontation between this priority and direct payments. Until now, direct payments have been a sacred cow for many in the commodity lobby. But both the White House and lawmakers may have to rethink their stand if they are to get a final bill.”

DTN writer Chris Clayton flushed out more details yesterday with respect to proposed changes in farm income limits for federal farm payments (“Farm Income Could Be Exempted From Rules,” link requires subscription).

Mr. Clayton stated that, “A commodity producer could have unlimited farm income and still collect commodity payments, but lawmakers plan to cut off producers who have more than $500,000 in annual income from non-farm sources.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., discussed with reporters some of the changes in income eligibility that have been agreed to so far in the farm-bill conference negotiations.

“The House has changed its plan for income eligibility from the bill passed last year. Under the version of the farm bill passed last July, people with less than two-thirds of their income from agricultural sources would be cut off from commodity payments when adjusted gross income topped $500,000. That bill also would eliminate payments for all producers making above $1 million AGI.”

The DTN item noted that, “Currently, a producer can have up to $2.5 million in income and still collect commodity payments. People earning above $2.5 million can continue collecting payments if three-quarters or more of their income comes from farming.”

***

Dan Morgan provided an easy to read general overview of Farm Bill activity over the past couple of daysin a brief item posted yesterday at The Washington Post Online.

The Post update stated that, “House Speaker Nancy Pelosi (D-Calif.) has turned up the pressure on Senate Democrats to support the House version of a $290 billion, 5-year farm bill, reports Dan Morgan, co-author of a nine-part Post series in 2006 exposing waste in agricultural subsidies.

“At a meeting Wednesday night, an angry Pelosi berated Senate Finance Committee Chairman Max Baucus (D-Mont.) for trying to tack onto the farm bill an array of tax measures to fund new spending, including disaster aid for Montana wheat growers and cattle ranchers. Tucked into the package pushed by Baucus is a $489 million capital gains depreciation tax break for thoroughbred horse breeders, such as those in the home state of Senate Minority Leader Mitch McConnell (R-Ky.).”

The item added that, “‘By the end of it, Baucus was stuttering,’ said a smiling House Agriculture Committee Chairman Collin Peterson (D-Minn.). A Baucus aide said the senator ‘has a long history of crafting legislation that can get votes and be signed into law. Sometimes that makes people mad.’

“Pelosi’s irritation was directed at Baucus’ unyielding position on taxes, now standing in the way of a farm bill that would provide benefits for key Democratic constituencies while also strengthening the party’s frayed ties with rural America.”

The Post Online update also noted that, “After Wednesday night’s high-level meeting involving Pelosi, Peterson moved quickly on Thursday to put forward a bipartisan House farm bill proposal that avoids new taxes and includes key provisions favored by Pelosi.

“These include a $9 billion increase for food stamps and nutrition programs; a $4 billion increase for conservation programs and $1.3 billion more for programs benefiting fruit and vegetable growers not eligible for traditional farm subsidies. In a nod to consumer groups, the bill also contains long-sought provisions requiring country-of-origin labeling of imported meat.

“But farmers, now enjoying record prices and profits, would also be big winners. Benefits included in the expiring 2002 farm bill–broadly criticized by fiscal conservatives as unduly generous–would be kept largely intact. The House proposal, for example, guarantees farmers $52 billion in automatic payments over the next 10 years even if prices stay high. As the 2006 Post series showed, farmers receive these payments even if they are not growing crops.”

Keith Good

Chris Clayton, writing yesterday at the DTN Ag Policy Blog, noted that, “The challenges with this farm bill right now come down to Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Chairman Charles Rangel, D-N.Y., coming to some terms on how to provide the $10 billion in offsets that congressional leaders agreed to give the farm bill.”

Mr. Clayton indicated that, “House Agriculture Committee Chairman Collin Peterson, D-Minn., vented frustration Tuesday about the difficulties having so many committee chairmen involved in the process. Peterson said too many lawmakers are advocating for certain dollar amounts in the farm bill, and ‘are being unreasonable,’ Peterson said. Lawmakers, likely pushed by lobbyists, are ‘locked into a number’ for funding in the bill rather than focusing on the best policy for the funding that an area receives.”

Also yesterday, Senate Ag Committee Chairman Tom Harkin (D-Iowa) held a press briefing with agricultural reporters. To listen to some audio clips from Chairman Harkin during this briefing, see this Senate Agriculture Committee webpage.

Dow Jones writer Bill Tomson reported yesterday that, “U.S. lawmakers, looking for money to help pay for nutrition, conservation, biofuels and agriculture disaster programs in the 2008 farm bill are considering cutting acreage-based farm subsidies, the Senate Agriculture Committee chairman said Wednesday.

“Sen. Tom Harkin, D-Iowa, talking to reporters, discussed the possibility of cutting 2% from the yearly $5.2 billion in ‘direct’ subsidies proposed for corn, soybean, wheat, cotton and other farmers over the five-year life of the next farm bill.”

Mr. Tomson noted that, “Bush administration officials have defended direct farm subsidies, calling them an important part of a safety net for farmers that does not distort trade in the eyes of the World Trade Organization.”

For more on the Bush administration’s perspective on direct payments, see pages 14 and 15 of their Farm Bill proposal.

Peter Shinn, writing yesterday at Brownfield, reported that, “A clearly frustrated Senate Ag Committee Chairman Tom Harkin told reporters Wednesday that Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi will have to broker an end to the stand-off on farm bill funding that continues to hold up the legislation. At issue is how to find the extra $10 billion dollars in farm bill spending over the Congressional Budget Office (CBO) baseline for farm programs, a figure to which all farm bill players have agreed.

“‘I understand that Senate Majority Leader Harry Reid and Speaker Pelosi have again spoken about the farm bill this week,’ Harkin said. ‘Reportedly, Senator Baucus, the Chairman of the Finance Committee and Congressman Rangel, the Chairman of the Ways and Means have also met, and resolving this $10 billion funding and the tax issues are in their court, not in mine.’

“There are a variety of potential explanations for exactly why House Ways and Means Committee Chairman Charlie Rangel and Senate Finance Committee Chairman Max Baucus cannot seem to reach consensus on how to proceed on the farm bill funding issue. Last week, Harkin suggested Rangel wanted more money for nutrition at the expense of the $4 billion permanent ag disaster aid program that Baucus has championed. This week, Harkin intimated that Rangel and Pelosi don’t favor some or all of the tax provisions included in the Senate version of the farm bill.”

Also with respect to Farm Bill views expressed recently by Chairman Harkin, DTN writer Chris Clayton reported yesterday that, “The elimination of any new funds for USDA’s Rural Development programs just won’t work for the chairman of the Senate Agriculture Committee.

“Sen. Tom Harkin, D-Iowa, expressed disappointment with a budget framework for the farm bill that was devised partly without his involvement. Harkin said the negotiators made a poor decision to cut out any new spending for rural development over the next five years of agricultural programs.”

Mr. Clayton explained that, “Initially, in the Senate bill, rural development programs were to get $400 million in new money over 10 years. The House approved $150 million. But the budget framework released in late March would set aside no new money.”

And DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Senate Agriculture Chairman Tom Harkin, D-Iowa, said he would like to get the bill through Congress by April 18, but other negotiators said they believe a short-term extension will probably be necessary. Although Agriculture Secretary Ed Schafer said Monday that he would recommend to President Bush that he agree to a short extension if Congress and the administration had agreed on the basic framework of the bill, Harkin told the North American Agricultural Journalists ‘I’m not pushing for’ the extension. Harkin added that he would be willing to hold farm bill conferences this weekend.

“Senate Agriculture Committee ranking member Saxby Chambliss, R-Ga., Senate Budget Chairman Kent Conrad, D-N.D., House Agriculture Chairman Collin Peterson, D-Minn., and House Agriculture Committee ranking member Bob Goodlatte, R-Va., all told the journalists that it’s more likely a short extension will be needed.”

Mr. Hagstrom explained that, “It’s important to finish the bill before the House and Senate reach agreement on the FY09 budget because that agreement would cause pressure to change the basis of the bill from the March 2007 baseline of $597 billion to the March 2008 baseline, Conrad said. The latter baseline is $636 billion, but the increase is mostly in food stamps while the baseline for commodity programs is either stagnant or has decreased, he said.

“But the biggest problem with switching baselines, both Conrad and Harkin said, is the amount of recalculation that would be needed.

“All the negotiators said the biggest roadblock to finishing the bill is still the issue of what offsets the Senate Finance Committee and the House Ways and Means Committee will provide to pay for farm bill costs above the baseline of the 2002 farm bill.”

In a press conference with reporters yesterday, Senate Finance Committee Ranking Member Charles Grassley of Iowa was asked about the Farm Bill. To listen to Sen. Grassley’s remarks, which included very interesting statements on funding allocation progress, as well as Farm Bill extension issues, just click here (MP3-2:36).

And, on yesterday’s AgriTalk Radio program, host Mike Adams visited briefly with Mary Kay Thatcher, Director of Public Policy for the American Farm Bureau- they talked about the Farm Bill. In particular, Farm Bill extension issues, among other topics, were discussed. To listen to the exchange between Mike Adams and Mary Kay Thatcher on yesterday’s AgriTalk program, just click here (MP3-1:59).

Meanwhile, Dow Jones News writer Bill Tomson reported yesterday that, “The U.S. House of Representatives Wednesday appointed conferees to work with senators to create a unified farm bill, laying down a blueprint for agricultural and nutrition policy for five years.

“The appointment of conferees paves the way for Congress to finish work on a five-year 2008 farm bill, House Agriculture Committee ranking minority member Bob Goodlatte, R-Va., said.

“Rep. Dennis Cardoza, D-Calif., said in a statement: ‘The appointment of conferees is a significant step towards completion of the Farm Bill.’”

For a list of the House conferees, see this House Ag Committee press release from yesterday.

Mr. Tomson added that, “Bush administration officials have said recently that another short-term extension would only be signed by President George W. Bush if Congress showed it was mostly finished with the farm bill. If that hasn’t happened by April 18, U.S. Department of Agriculture Secretary Ed Schafer said recently, a one- or two-year extension of the current 2002 farm bill may be necessary.”

“The House, in a 400-to-11 vote Wednesday evening, approved a non-binding ‘motion to instruct’ farm bill conferees not to use tax measures to fund the 2008 farm bill,” the article said.

For more on this “motion to instruct,” see this press release issued yesterday by Agriculture Ranking Member Bob Goodlatte (R-Virginia).

WASDE Update- Food Issues

The World Agricultural Outlook Board (WAOB) released the monthly World Agricultural Supply and Demand Estimates (WASDE) report yesterday.

Specifically, yesterday’s WASDE report stated that, “Projected U.S. wheat ending stocks for 2007/08 are unchanged this month as lower feed and residual use offsets an increase in exports. Feed and residual use is projected 50 million bushels lower as the March 1 stocks indicated lower-than-expected use in the December-February quarter. Exports are projected 50 million bushels higher as export sales and shipments remain strong with several major export competitors taxing or otherwise restricting shipments. The projected range for the season-average farm price is narrowed 5 cents on each end to $6.55 to $6.75 per bushel.

“Global wheat supplies for 2007/08 are raised 1.5 million tons this month on late-season revisions to production in non-exporting countries.”

For reference to historic price levels of wheat, see this graph.

With respect to rice, the WASDE report indicated that, “No changes are made to the U.S. 2007/08 rice supply and use projections. However, the season-average farm price is raised 20 cents per cwt on each end of the range to $12.05 to $12.35 per cwt, compared to $9.96 per cwt for 2006/07.”

For reference to historic price levels of rice, see this graph.

Regarding oilseeds, the WAOB noted that, “U.S. soybean exports for 2007/08 are increased 50 million bushels to 1,075 million this month reflecting strong year-to-date shipments. Despite record high soybean prices, exports have remained strong, especially to China, where imports from the United States are likely to exceed the 2004/05 record. Soybean crush is raised 5 million bushels to a record 1,840 million bushels, mainly on stronger-than-expected soybean meal and oil exports. Seed use is raised to reflect expected plantings for 2008 reported in USDA’s March 31 Prospective Plantings report. U.S. soybean ending stocks are raised 20 million bushels to 160 million, still down sharply from the record level set in 2006/07. Residual use is reduced based on indications from the March 31 Grain Stocks report.

“Price forecasts for soybeans, soybean oil, and soybean meal are all reduced this month. The U.S. season-average soybean price range is projected at $10.00 to $10.50 per bushel, down 30 cents on the high end of the range.”

The report added that, “Global oilseed production for 2007/08 is projected at 390.8 million tons, up 0.7 million tons from last month.”

For reference to historic price levels of soybeans, see this graph.

With respect to corn, the WASDE report stated that, “U.S. corn ending stocks for 2007/08 are projected 155 million bushels lower this month as increases in feed and residual use and exports more than offset a reduction in corn use for ethanol. Feed and residual use is projected 200 million bushels higher as March 1 stocks indicated higher-than-expected disappearance during the December-February quarter. Ethanol corn use is projected 100 million bushels lower as the pace of new plant startups lags earlier expectations; however, rising ethanol prices continue to support producer margins and capacity utilization for existing plants remains strong. Partly offsetting is a 5-million-ton increase in other food, seed, and industrial use.

“Exports are projected 50 million bushels higher based on the strong pace of shipments and large outstanding sales balances. The projected season-average farm price for corn is raised to $4.10 to $4.50 per bushel compared with $3.75 to $4.25 per bushel last month. Record use during the first 6 months of the 2007/08 marketing year and prospects for smaller-than-expected production in 2008 are expected to support cash and futures prices near current record levels through the summer.”

For reference to historic price levels of corn, see this graph.

To listen to a brief audio summary of the WASDE report, just click here (MP3-0:54, Rod Bain, USDA Radio).

Associated Press writer Stevenson Jacobs reported yesterday that, “Corn prices soared to a record Wednesday after the U.S. government said stockpiles were falling faster than expected, raising concerns of a shortage of the grain used to feed livestock and make biofuel.

“Corn’s rally came amid a big upswing in the wider commodities complex, with copper, crude oil and other energy futures all hitting record highs.

“The U.S. Department of Agriculture lowered its April corn stockpile estimate to 1.283 billion bushels, down from 1.438 billion just last month and sharply lower than expectations. Analysts surveyed by Dow Jones Newswires predicted that corn ending stocks would fall to about 1.303 billion bushels.”

The AP story added that, “Corn for May delivery jumped 13.75 cents to settle at $6.05 a bushel on the Chicago Board of Trade, after earlier rising as high as $6.16 a bushel, the highest ever.

“Prices for corn have shot up 30 percent this year amid dwindling stockpiles and surging demand to feed livestock and make alternative fuels including ethanol. Moreover, cold, wet weather in parts of the U.S. corn belt may force farmers to delay spring planting, potentially sending prices even higher.

“Corn first breached the $6 threshold last week after the government predicted that American farmers -the world’s biggest corn producers- will plant sharply less of the crop in 2008 compared to last year. The Department of Agriculture projected that farmers will plant 86 million acres of corn in 2008, an 8 percent drop.”

***

The New York Times editorial board indicated today that, “Most Americans take food for granted. Even the poorest fifth of households in the United States spend only 16 percent of their budget on food. In many other countries, it is less of a given. Nigerian families spend 73 percent of their budgets to eat, Vietnamese 65 percent, Indonesians half. They are in trouble.

“Last year, the food import bill of developing countries rose by 25 percent as food prices rose to levels not seen in a generation. Corn doubled in price over the last two years. Wheat reached its highest price in 28 years. The increases are already sparking unrest from Haiti to Egypt. Many countries have imposed price controls on food or taxes on agricultural exports.”

The Times added that, “The United States and other developed countries need to step up to the plate. The rise in food prices is partly because of uncontrollable forces — including rising energy costs and the growth of the middle class in China and India. This has increased demand for animal protein, which requires large amounts of grain.

“But the rich world is exacerbating these effects by supporting the production of biofuels. The International Monetary Fund estimates that corn ethanol production in the United States accounted for at least half the rise in world corn demand in each of the past three years. This elevated corn prices. Feed prices rose. So did prices of other crops — mainly soybeans — as farmers switched their fields to corn, according to the Agriculture Department.”

Reuters writer Mayank Bhardwaj reported yesterday that, “Food riots which have struck several impoverished countries could spread with shortages and high prices set to continue for some time, the head of the United Nation’s Food and Agriculture Organization (FAO) said.

“A combination of high oil and fuel prices, rising demand for food in a wealthier Asia, the use of farmland and crops for biofuels, bad weather and speculation on futures markets have pushed up food prices, prompting violent protests in a handful of poor states.”

Doha

To listen to a brief audio summary of perspectives on the Doha Round of WTO trade talks from yesterday, which includes a comment from Chief U.S. Ag Negotiator Joe Glauber, just click here (MP3- 0.58, Gary Crawford, USDA Radio).

Keith Good

“The chairman of the House Agriculture Committee, Rep. Collin Peterson, said today that he’s proposing a cut in payments to agents and insurance companies that would vary according to the state.

“The Minnesota Democrat said the cuts would be targeted to states such as Iowa where insurance premiums have risen sharply because of soaring commodity prices and where insured losses are relatively low.”

Mr. Brasher added that, “He [Chairman Peterson] declined to release the size of the cuts in each state, but said his overall plan would save $1.4 billion over 10 years.

“‘Frankly we don’t think that insurance agents need a 200 percent increase in commissions given the situation we’re in,’ Peterson said.”

DTN writer Chris Clayton reported yesterday (link requires subscription) that, “Unable to get the farm bill settled, the chairman of the House Agriculture Committee chairman has been spending his freetime pouring over crop insurance profits.

“Rep. Collin Peterson, D-Minn., a certified public accountant, has come up with a proposal that would cut administration and overhead expenses for crop insurance, particularly in states that have seen major increases in crop-insurance premiums, yet have low annual crop losses. The proposal could shift another $1.4 billion out of spending for crop insurance and into other agriculture programs.

“‘What we have been trying to get at in crop insurance is these big increases in premiums that have gone on and the related big increase in (administration and overhead) that is a result of it,’ Peterson said.”

Mr. Clayton indicated that, “Peterson said his new proposal, which would have an annual sliding scale, would cut another $1.4 billion out of crop insurance, effectively leading to $6.4 billion in total cuts in increased spending on crop insurance over the 10-year funding cycle for the bill. Peterson has talked with other farm-bill negotiators and some crop-insurance lobbyists about the potential plan and ‘so far, everybody thinks this is a pretty good idea,’ he said. Peterson called it ‘true and genuine reform of crop insurance.’”

And the DTN article added that, “Peterson said he is trying to get the Senate Agriculture Committee conferees and the Ways and Means Committee leadership formally together to hammer out just where they expectto provide $10 billion to complete the farm bill. It’s a conundrum for Peterson because he effectively has no control or say over where they find this $10 billion.”

In a related item posted yesterday at The Des Moines Register’s Cash Crops Blog, Philip Brasher pointed out that, “The chairmen of the House and Senate agriculture committees say the biggest hangup on the farm bill continues to be the dispute over how to fund it and comply with pay-as-you-go budget rules.

“‘The biggest problem we’re facing is the issue of offsets,’ said Rep. Collin Peterson, the House agriculture chairman.

“Peterson and his Senate counterpart, Tom Harkin of Iowa, said the funding issue is the problem of the House and Senate tax-writing committees.

“Peterson said a meeting last week between Charlie Rangel, the New York Democrat who chairs the House Ways and Means Committee, and Sen. Max Baucus, the Montana Democrat who chairs the Senate Finance Committee, ‘didn’t go particularly well.’”

Meanwhile, Iowa GOP Senator Chuck Grassley, the Ranking Member on the Senate Finance Committee, held a press briefing with reporters yesterday in which he was asked about the Farm Bill. To listen to this exchange on the Farm Bill from yesterday’s briefing, just click here (MP3- 1:42).

***

As the Farm Bill debate moves forward and commodity market prices for some program crops continue to be sustained at historically high levels (the Associated Press noted yesterday that, “Wheat for May delivery added 12.75 cents to $9.34 a bushel; May corn rose 1.25 cents to $5.9125 a bushel; May soybeans fell 3.5 cents to $12.515 a bushel.”), real changes regarding current policy are taking place on many farms across the U.S.

Of particular interest in the current market environment are impacts regarding federal conservation programs.

David Streitfeld reported in today’s New York Times (“As Prices Rice, Farmers Spurn Conservation”) that, “Out on the farm, the ducks and pheasants are losing ground.

“Thousands of farmers are taking their fields out of the government’s biggest conservation program, which pays them not to cultivate. They are spurning guaranteed annual payments for a chance to cash in on the boom in wheat, soybeans, corn and other crops. Last fall, they took back as many acres as are in Rhode Island and Delaware combined.

“Environmental and hunting groups are warning that years of progress could soon be lost, particularly with the native prairie in the Upper Midwest. But a broad coalition of baking, poultry, snack food, ethanol and livestock groups say bigger harvests are a more important priority than habitats for waterfowl and other wildlife. They want the government to ease restrictions on the preserved land, which would encourage many more farmers to think beyond conservation.”

Mr. Streitfeld explained that, “For years, the problem with cropland was that there was too much of it, which kept food prices low to the benefit of consumers and the detriment of farmers.

“Now, because of a growing global middle class as well as federal mandates to turn large amounts of corn into ethanol-based fuel, food prices are beginning to jump. Cropland is suddenly in heavy demand, a situation that is fraying old alliances, inspiring new ones and putting pressure on the Agriculture Department, which is being lobbied directly by all sides without managing to satisfy any of them.

“Born nearly 25 years ago in an era of abundance, the Conservation Reserve Program is having a rough transition to the age of scarcity. Its 35 millionacres — about 8 percent of the cropland in the country — are the big prize in this brawl.”

The Times article stated that, “Groups like Ducks Unlimited and Pheasants Forever want the government to raise rental rates to keep the same amount of land in the program or even increase it. While offering more money to farmers might be a difficult sell in a year of record farm profits, Jim Ringelman of Ducks Unlimited said, ‘There are overriding environmental issues here.’

“The bakers and their allies have a different set of overriding issues: high commodity prices. The rising cost of feed is hurting ranchers, the rising cost of corn is hurting ethanol producers and the rising cost of wheat is hurting bread makers.

“‘We’re in a crisis here. Do we want to eat, or do we want to worry about the birds?’ asked JR Paterakis, a Baltimore baker who said he was so distressed at a meeting last month with Edward T. Schafer, the agriculture secretary, that he stood up and started speaking ‘vehemently.’”

“Such problems were never contemplated when the Conservation Reserve was conceived as part of the 1985 Farm Bill. Participants bid to put their land in the program during special sign-ups, with the government selecting the acres most at risk environmentally. Average annual payments are $51 an acre. Contracts run for at least a decade and are nearly impossible to break — not that anyonewanted to until recently,” Mr. Streitfeld said.

The Times article also provided this helpful perspective: “The program peaked late last summer, with more than 400,000 farmers receiving nearly $1.8 billion for idling 36.8 million acres. Put all that land together and it would be bigger than the state of New York.

“The group doing the most to undermine this amiable coexistence is the farmers themselves. Last fall, when five million acres in Conservation Reserve came up for renewal, only half of them were re-entered. While the program has gained some high-priority land in the last few months, in part from an initiative to restore bobwhite quail habitats, the net loss is still more than two million acres.”

The Times article also stated that, “Ardell Magnusson, a farmer in Roseau, Minn., shows the changing mood. He said the program was ‘a godsend’ when he put 300 of his 2,300 acres into it eight years ago. ‘I needed some guaranteed income or my banker was going to tell me to find another occupation,’ Mr. Magnusson said. It is not exactly a bonanza: he gets about $12,000 a year.

“He calculates he can make more than that by farming sunflowers or wheat or soybeans. When his contract expires in two years, he plans to withdraw about half his land. It would not be a shock if the Agriculture Department cut him loose sooner. ‘Another nine months of wheat at today’s prices and there willbe political pressure on this program like you wouldn’t believe,’ Mr. Magnusson said.”

Doha

In developments regarding the Doha round of WTO multi-lateral trade talks, Reuters writer Doug Palmer reported yesterday that, “Negotiators in world trade talks have made ‘a lot of progress’ over the past three months and are close to a possible breakthrough, a top U.S. trade official said on Tuesday.

“‘Our hope is that ministers will be able to meet very soon — this spring — to reach an agreement that we can credibly say will open new markets by cutting tariffs,’ Deputy U.S. Trade Representative John Veroneau told the President’s Export Council, a White House advisory group.

“‘We’re at a point now where hopefully we can have a breakthrough,’ Veroneau said. ‘We’ve made a lot of progress over the past three months in Geneva and in capitals.’”

“WTO Director Pascal Lamy said on Tuesday he could call a meeting of trade ministers in May to try to strike a broad deal. That would be followed by further talks to fill in details,” the article said.

Mr. Palmer indicated that, “Veroneau said negotiators were whittling down the number of issues for trade ministers to decide, but the next four to eight weeks were critical to thesuccess of the talks.

“‘President Bush made clear that he is prepared to make difficult choices on agriculture, but it requires others to step forward to cut tariffs,’ Veroneau said.

“Joe Glauber, Washington’s senior agriculture negotiator in the Doha round, said on Monday countries were ‘very, very close’ in difficult technical negotiations over opening import markets for politically sensitive farm goods.

“Washington has insisted the deal must create significant new export opportunities for U.S. farmers, manufacturers and service providers in order to persuade Congress to approve deep cuts in farm subsidies.”

And an AFP article from yesterday reported that, “Negotiators have made progress towards a global trade liberalization accord under the Doha round and a meeting of world trade ministers could now be held in May, the head of the WTO said Tuesday.

“‘I will only take a decision to bring the ministers together if I have the feeling there is a reasonable chance of reaching an agreement, and for the moment it is possible that this could happen in May,’ World Trade Organization Director General Pascal Lamy told a press conference here.

“Lamy said talks hadnot made sufficient progress to justify the calling of a ministerial meeting in April, as had been planned.

“But ministers could now convene next month.”

Colombia Free Trade Pact

In regional trade news, Brownfield’s Peter Shinn reported yesterday that, “U.S. Ag Secretary Ed Schafer held a teleconference with reporters Tuesday to promote the U.S.-Colombia Free Trade Agreement (FTA), which President Bush sent to Congress on Monday. The President took that step despite the opposition of the leading Democrats in the House and Senate.

“But Schafer said opposition to the Colombian FTA isn’t due to a groundswell of opposition in rural America. He noted over 40 agricultural groups have urged Congress to quickly approve the trade pact.

“‘You know, the economy depends on agriculture - agriculture depends on exports,’ Schafer said. ‘That is replicated in state after state after state across this country,’ he added. ‘And people know that.’”

In the press briefing, Sec. Schafer noted that, “U.S. farm exports to Colombia that will receive immediate duty-free treatment on products including high quality beef, cotton, wheat and soybeans. Many specialty crops will also become duty free, including apples, pears, cherries and many processed food products like frozen French fries and cookies. The remaining tariff on our products will be eliminated over time.”

On Monday, U.S. Trade Representative Susan Schwab also held a press briefing regarding the Colombia FTA (full transcript, related background- “Dates you Need to Know,” “How Trade Promotion Authority Works”); where she noted in part that, “So from a trade perspective, this is a matter of leveling the playing field and, as we’ve seen with our other free trade agreements, U.S. exports to our FTA partner countries have grown 40 percent faster than our exports to the rest of the world. So this is a — this is important in terms of U.S. export interests, whether you’re talking about John Deere tractors or Caterpillar earthmoving equipment; whether you’re talking about Sony laptops produced in San Diego or televisions produced in the Pittsburgh area; high quality beef, pork products, chicken leg quarters for those of you who have agricultural constituencies, that you — that are reading or listening to your commentaries. This is a big play for American workers, to service providers, to entrepreneurs.”

Also on Monday, President George Bush discussed the Colombia FTA (related White House “Fact Sheet”); he indicated that, “As soon as it is implemented, the agreement I’m sending Congress will eliminate tariffs on more than 80 percent of American exports of industrial and consumer goods. Many products in key American sectors such as agriculture and construction equipment, aircraft and auto parts, and medical and scientific equipment will enter Colombia duty-free. If you’re an American farmer, it’s in your interest that this agreement get passed — after all, farm exports like high-quality beef, cotton, wheat, soybeans and fruit will enter duty-free. And in time this agreement will eliminate tariffs on all American exports to Colombia.”

And on yesterday’s AgriTalk radio program, Assistant U.S. Trade Representative Sean Spicer spoke with host Mike Adams about the Colombia FTA. To listen to the discussion between Mike Adams and Assistant U.S.T.R. Sean Spicer, just click here (MP3- 3:43).

In news regarding the North American Free Trade Agreement (NAFTA), Michael A. Fletcher reported in today’s Washington Post that, “Overall, they said, NAFTA has been a net plus, if a modest one, for the U.S. economy. Even as the number of factory jobs dropped, manufacturing output in the United States was up 58 percent between 1993 and 2006, as U.S. plants produced more goods with fewer workers. Exports are at a record high, and trade among the three NAFTA partners has tripled since 1994. Meanwhile, overall employment in the United States has grown 24 percent and average unemployment is down since NAFTA went into effect. Some cities along the border with Mexico have grown, and farm exports have gone up.”

EU- Common Agricultural Policy

Dow Jones News writer Matthew Dalton reported yesterday that, “The European Commission Tuesday said it would recover EUR83 million in farm subsidies improperly paid to 11 member countries.

“The biggest blow is to Spain, which will lose EUR53 million in subsidies for planting unauthorized vineyards. France will lose EUR11 million, mainly for receiving improper subsidies for bananas.”

A related press release from yesterday on this issue is available here.

The Dow Jones article added that, “The amount is small compared to the European Union’s total annual spending on farm subsidies of roughly EUR50 billion. The other countries that will have to repay some subsidies are the Czech Republic, Denmark, Germany, Ireland, Italy, Luxembourg, the Netherlands, Austria and Portugal.”

Keith Good

“Disagreement between House and Senate tax committee leaders on how to pay for a $10 billion spending increase has slowed action on the farm bill, the five-year policy blueprint.

“Congressional farm committee leaders also disagree on issues such as an agriculture disaster fund.”

Mr. Abbott indicated that, “A one-month extension of some agricultural programs expires on April 18, creating an informal deadline for the new law, now six months overdue. President George W. Bush says if there is no agreement by April 18, Congress should extend the 2002 farm law for at least one year.

“Asked if April 18 was a firm deadline, Schafer said ‘we can look at another short-term extension’ if Congress is in the final stages of enacting a bill after agreeing on a spending level, a framework of key points and how to pay for it.”

To listen to a brief audio clip from Sec. Schafer on this issue, just click here (MP3-1:00- Rod Bain, USDA Radio).

Yesterday’s Reuters article also stated that Sec. Schafer commented on the Conservation Reserve Program: “Large-scale release of land from the long-term Conservation Reserve would have little impact on food prices. ‘(It) doesn’t solve the problem.’ The Conservation Reserve pays landowners an annual rent to retire environmentally fragile land.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Agriculture Secretary Ed Schafer said Monday the Bush administration does not consider April 18 a drop-dead date and would consider another short-term extension of the farm bill if Congress and the administration have agreed on a basic framework by the date the current extension of the 2002 farm bill expires.

“When President Bush agreed to that extension, he said that if Congress could not write a new farm bill by April 18, Congress should send him an extension for a year or longer because farmers should not have to deal with the continued uncertainty of whether a new bill will be passed. After a speech to the North American Agricultural Journalists on Monday, Schafer said, ‘If we have the framework agreement done, [including] reforms and overall spending and are working out the mechanics … we could look at another short-term extension.’

“But Schafer added that if there is no progress by Congress before April 18, he would not recommend another short-term extension and would prefer a longer extension of the current law.”

Yesterday’s DTN article also indicated that, “Schafer said the administration is willing to consider a permanent disaster program as part of ‘a total safety net package,’ but is concerned that the current proposal would put the disaster payments in the World Trade Organization’s amber box of trade-distorting subsidies;” and pointed out that, “The long-term solution for high commodity prices is to get the research done for cellulosic biofuels, Schafer said. He predicted that higher commodity prices could be an issue for 10 years until cellulosic biofuels are in production. He also said USDA officials are keeping a close eye on the livestock industry for potential trouble due to high feed prices in attempt to ‘avert’ a crisis in that industry or to manage one if necessary.”

To listen to Sec. Schafer’s comments on disaster aid and trade concerns, click here (MP3- 1:00-Rod Bain, USDA Radio).

Doha

With respect to U.S. agricultural trade concerns, Reuters news reported yesterday that, “Negotiators are ‘very, very close’ to resolving a handful of technical agriculture issues standing in the way of a ministerial meeting that could cement agreement on a new world trade deal, a top U.S. official said on Monday.

“Joe Glauber, the top U.S. agriculture negotiator in the Doha round, told reporters that negotiators in recent Geneva talks had finally reached a breakthrough for moving ahead in the stubborn issue of sensitive products, which are goods sheltered from full tariff cuts.

“‘If this can get resolved — and one to two other issues — we’ll be in position to move forward,’ said Glauber, who is also the Agriculture Department’s top economist.”

Global Commodity Issues

An AFP article from today reported that, “Kenya will maintain a 35% import duty on wheat grain despite calls for its reduction in the face of rocketing food prices, a government official said Tuesday.

“Agriculture ministry permanent secretary Romano Koome said the tax was intended to protect local small-scale farmers from a glut of wheat supplies from neighboring countries, where duty is lower.”

The article noted that, “Koome said talks involving the government, millers and farmers on tariffs have been frozen pending a lasting solution in the face of a surge of inflation to 21.8% in March, up from the previous month’s 19.1%, with rising food prices blamed.

“Millers have urged the government to reduce the tax to spare consumers rising commodity prices, but farmers have rejected the call saying such a cut would mean less market for this year’s harvest.”

A separate AFP article from today reported that, “Crime had never really been a problem in Takham Uthao’s impoverished rice farming village in central Thailand until prices for his crop began hitting record highs.

“The price of Thai rice jumped 50% last month to levels never before seen, turning the output from Takham’s paddy fields into a far more valuable commodity just as the harvest was getting underway.

“Now staving off thieves from his paddies is part of his daily routine.”

The article stated that, “Takham said he can’t blame people for stealing a bit of his crop as soaring global rice prices have pushed up costs at home too and food inflation has made pork, chicken and even vegetables more expensive.

“But rice is the biggest problem, he said, because without it Thais don’t feel as if they have had a real meal. ‘Rice is life,’ Takham said.”

And the Associated Press reported yesterday that, “Protesters angered by high food prices flooded the streets of Haiti’s capital Monday, forcing businesses and schools to close as unrest spread from the countryside.

“Witnesses said at least one person was killed by hotel security guards during a protest in the southern city of Les Cayes, where at least four people died last week in food riots and clashes with U.N. peacekeepers. Police said they were investigating.”

The AP article added that, “Haitians are particularly affected by food prices that are rising worldwide. Eighty percent of the population lives on less than $2 a day. The cost of staples such as rice, beans, fruit and condensed milk has gone up 50 percent in the past year.”

Meanwhile, Associated Press writer Harry Dunphy reported yesterday that, “Rising food prices, which have caused social unrest in several countries, are not a temporary phenomenon, but are likely to persist for several years, World Bank President Robert Zoellick says.

“Strong demand, change in diet and theuse of biofuels as an alternative source of energy have reduced world food stocks to a level bordering on an emergency, he says.

“Speaking to reporters Monday before the bank’s spring meeting this coming weekend, Zoellick said the 185-member World Bank would work with other organizations to deal with the crisis by seeking ways to help farmers, especially in Africa, to increase productivity and improve access to food through schools or workplaces.

“‘This is not a this-year phenomenon,’ he said, referring to the price spike. ‘I think it is going to continue for some time.’”

In news regarding U.S. food prices, Chicago Tribune writers Tim Jones and Mary Ann Fergus reported today that, “Markita Barrett is a single mother and has all she can handle with two daughters, ages 10 and 1, and her pending college graduation. Still, she can’t stop thinking about cows.

“‘I don’t know what they’re doing with these cows,’ said Barrett, expressing a familiar frustration with the rising price of a gallon of milk, which is up 14 percent in the past year. ‘What do these animals need? What physically are they doing differently?’

“They’re the same cows, but they’re eating high-priced corn, which is at the root of food price inflation afflicting every Americanbut perhaps more acutely those on food stamps who, like 35-year-old Barrett of north suburban Zion, see their buying power erode every month.”

The Tribune article added that, “Food stamp usage has hit a new high, and more Americans than ever — a record 28 million projected this year — are using them, but with the steep climb in food prices, the monthly food allowance doesn’t go nearly as far. Moreover, food stamps are being used up earlier in the month by those who receive them, even as the galloping price of gasoline is aggravating the cost squeeze, draining discretionary income often used to buy food after the stamps run out.

“Annual adjustments are made in the purchasing power of food stamps, but they have not kept pace with food inflation.”

Later, the Tribune writers stated that, “Food price inflation began to take off in 2007, with price spikes not seen since 1980.

“Food prices have jumped an average of 5.5 percent in the past six months, and according to America’s Second Harvest, which oversees the national network of food banks, are estimated to rise 7.5 percent annually in each of the next five years. That’s triple the inflation rate of 2002 through 2006.”

In conclusion, the article noted that, “Some inflationary price relief is hoped for from Congress, which is debating the farm bill, the massive agricultural subsidy package that also regulates the food stamp program, including benefit adjustments.

“But whatever Congress decides, the annual adjustment is not expected to offset the biggest increase in food inflation in nearly three decades.”

U.S. Crop Progress

The USDA’s National Agricultural Statistics Service (NASS) released their weekly Crop Progress report yesterday, highlights of which were reported yesterday by DTN’s Anthony Greder.

Mr. Greder noted that, “Winter wheat [graphic] is beginning the 2008 growing season with lower condition ratings than it did in spring of 2007, according to the first USDA weekly crop progress report. Winter wheat is rated 21 percent poor to very poor for the week ended April 6. Only 10 percent of the crop was rated poor to very poor in the comparable week of 2007. Of course, that first week of crop ratings in 2007 fell before the notorious Easter freeze that devastated wheat fields.

“Overall, winter wheat was rated 8 percent excellent, 37 percent good, 34 percent fair, 14 percent poor and 7 percent very poor.That compares to 19, 45, 26, 7 and 3 percent respectively last year.”

“Spring wheat [graphic] is 5 percent planted, compared to 4 percent at this time last year and a 6 percent average.”

The DTN article pointed out that, “‘Planting progress figures for spring wheat, barley, oats, cotton, and rice are also somewhat bullish to the grains futures markets because they are slower across the board than their five-year averages,’ [DTN Analyst Elaine Kub] said. ‘This forebodes potentially yield-reducing delays for all crops, including corn.’

“‘USDA is often able to include a corn-planting progress figure in its first April Crop Progress report,’ she added, ‘but nationwide, planting is currently too minimal to be reported.’”

With respect to future’s prices, the Associated Press reported yesterday that, “Wheat for May delivery fell 53 cents to $9.2125 a bushel; May corn dropped 8 cents to $5.90 a bushel;; May soybeans declined 22 cents to $12.55 a bushel.”

And Hyun Young Lee reported in today’s Wall Street Journal that, “Crude-oil futures rose nearly 3%, as the market braced for further gains on emerging supply concerns.

“Light, sweet crude for May delivery settled $2.86, or 2.7%, higher at $109.09 a barrel Monday on the New York Mercantile Exchange. Crude has gained 5.1% during the past two sessions. It is down 1.1% from its Nymex record close of $110.33 reached March 13, but it has jumped 14% this year and is up 77% from 52 weeks ago.

“The rise came despite a stronger dollar. A weakening dollar has resulted in higher crude prices, some traders say, as foreign buyers use stronger currencies to bid prices up.”

Colombia Trade Pact

Ian Swanson, writing yesterday at The Hill Online, reported that, “President Bush on Monday took the unprecedented step of trying to force the Congress to vote on a controversial trade agreement with Colombia opposed by most Democrats.

“The move sparked an immediate outcry from Democratic leaders, who for days had warned Bush against sending them the legislation. The Colombia deal was signed last summer before the so-called fast-track law expired, allowing Bush to prod Congress into a vote.”

The Hill article explained that, “This is the first time Bush has tried to use the fast-track law to force Congress into voting on a trade deal.

“Last year, he only sent Congress a trade deal with Peru once it had been changed to meet the demands of key Democrats, who then offered their support.

“Bush said he had tried to work with Congress to secure a path forward for Colombia, to no avail. He also said he had to send the legislation to Congress now to ensure a vote on the deal before his administration leaves office.

“Under fast-track, Congress cannot amend trade deals and must hold votes within 90 legislative days of receiving legislation implementing a deal. The law also limits floor debate on the trade deal and prevents a Senate filibuster.”

Secretary of Agriculture Ed Schafer also issued a statement on the Colombia Trade Pact yesterday, which noted in part that, “For more than a year, this Administration has been seeking to work closely with Congress to identify a bipartisan path to bring legislation to implement this agreement up for approval. Without implementation, American farmers loose. It is time for fair and equal two-way trade with Colombia.

“Colombia is the largest market for U.S. agriculture exports in South America. In 2007, the United States exported a record $1.2 billion of agricultural products to Colombia.

“However, current tariffs between the United States and Colombia are one-sided, as 99.9 percent of Colombian food and agricultural exports enter into the United States duty-free while no U.S. agricultural exports to Colombia receive duty-free treatment. It is time for the U.S. to be on a level playing field with Colombia.

“Under the Free Trade Agreement, the United States will receive equal or preferential treatment on all key products under the agreement.”

Keith Good

Reuters news reported on Thursday that, “Ministers may not meet until May to hammer out a Doha trade deal, the head of the World Trade Organisation said on Thursday.

“‘I would be surprised if I needed the ministers in town before the end of April,’ WTO Director-General Pascal Lamy told Reuters at a meeting of African finance ministers.

“‘But I wouldn’t be surprised if the meeting happened by the end of May.’”

And, an AFP article from Friday indicated that, “World trade ministers have called off a meeting planned in Geneva for this month in the absence of sufficient progress toward a global trade liberalization deal, a source close to the talks said Friday.

“But he added that some headway had been made in discussions on reducing barriers to agricultural trade, making a ministerial meeting possible in May.

“Negotiations aimed at securing a preliminary agreement on trade in agricultural and industrial products haven’t advanced as much as had been hoped at the start of the year, he said.”

Meanwhile, Reuters writers Adriana Garcia and Missy Ryan reported on Thursday that, “The deepening gloom over the global economy may augur well for trade talks, a top U.S. official said, as negotiators suggested the Doha round is on the cusp of a breakthrough after years of acrimony and delay.

“‘There is a growing sense that, given the concerns about … slowing growth in the global economy, that ministers are even more focused on opportunities that would provide a shot in the arm,’ Deputy U.S. Trade Representative John Veroneau told the Reuters Latin America Investment summit on Thursday.

“Veroneau, the Bush administration’s lead trade negotiator for Latin America, said it is too early to tell when ministers from the World Trade Organization’s 151 member countries would be ready to gather in Geneva for a meeting widely expected to seal a long-awaited breakthrough in the talks.”

The article explained that, “The stakes are high for the United States, Veroneau said, which is seeking to contain a deepening housing and credit crisis and reinvigorate its slowing economy.

“Governments the world over are under pressure, too, as they try to shield themselves from U.S. economic woes and seek to manage the destabilizing effects of record-high prices for fuel and basic foodstuffs such as bread and milk.”

Later, Garcia and Ryan stated that, “While a deal may still be had before President George W. Bush steps down in January 2009, Veroneau acknowledged it would be difficult at this stage to be able to send a finalized deal to Congress this year.”

Reuters writers Adrian Croft and Sebastian Tong reported on Saturday that, “The IMF is due to release its twice-yearly World Economic Outlook next week.

“Earlier in the week, the IMF cut its 2008 outlook for world economic growth for the second time this year — a move that acknowledged housing and credit problems in the United States were exacting a heavy toll on the global economy.

“The IMF now expects global growth to slow to 3.7 percent this year, down from its January forecast of 4.1 percent.”

The article concluded by noting that, “One bright spot was talk of improving prospects for a breakthrough in the long-running talks on world trade liberalisation.

“WTO chief Pascal Lamy said the Doha round of talks were ‘inevitably long and complex.’

“‘My feeling is that we are now reaching a stage where it (an agreement) could happen,’ he said.”

And, an item posted today at The Australian Online stated that, “As [Australian Prime Minister Kevin Rudd] acknowledged after meeting European leaders in London, agreement on Doha is still a long way from sealed, but he remains more optimistic than many.

“Ultimately, Mr Rudd could become another in a long line of Australian leaders who have misjudged the difficulty of the task of reaching multilateral agreements through the World Trade Organisation. Alternatively, he could come to be seen as a global player who was able to call it early. For Mr Rudd, the Doha talks also from part of a broader strategy to forge stronger direct links between Australia and the European Union.

“There is always a danger that to get a deal done on Doha, the participants will settle for a pragmatic solution that falls short of the high ideals set when the Doha round of talks began. But there is a new urgency to finding an agreement because of the looming US presidential elections and to provide what Mr Rudd has described a ‘shot in the arm’ to restore confidence to the global financial system.

“Australian farmers would be big winners from any conclusion to the Doha round of negotiations on agricultural goods, which Mr Rudd said could deliver cuts of up to two-thirds or more to trade-distorting tariffs in developed countries.Negotiations on manufactured goods continues to be problematic, with developing countries, led by Brazil and India, arguing for a continuation of tariff protection.”

For more on the WTO and the Doha Round of trade talks, see, “Time to Rethink the WTO System: The United States, the European Union, and World Trade,” which was written by Hugh Corbet, President of the Cordell Hull Institute, and Joe Guinan, a Program Officer with the German Marshall Fund of the United States.

The paper, which was published in March, “argues that there is a need for reflection on the purpose of the WTO system. Putting the rapid integration of the world economy in perspective, this paper dwells on American and European leadership, or lack thereof, and on the major threats to the WTO system over agricultural protectionism and the proliferation of trade agreements. The authors conclude with alternative broad approaches to the further liberalization of trade.”

Global Commodity Issues

Dow Jones News reported today that, “Kazakh Prime Minister Karim Masimov told his Cabinet Monday to consider imposing export duties or fully suspend grain exports, Kazakh state news Kazinform reported Monday.

“‘I’m ordering Ministry of Agriculture and Ministry of Industry and Tradeto consider possibilities of imposing customs duties on (grain) exports or fully banning exports of grain,’ Masimov was quoted by Kazinform as saying. ‘The global tendency is alarming, prices of bread are rising inexorably.’”

Bloomberg News reported today that, “From Cairo to New Delhi to Shanghai, a run on rice is threatening to disrupt worldwide food supplies as much as the scarcity of confidence on Wall Street this year roiled credit markets.

“China, Egypt, Vietnam and India, representing more than a third of global rice exports, curbed sales this year, and Indonesia says it may do the same.”

James Kirkup, in an article posted today at The Telegraph Online reported that, “Rising food prices threaten economic stability and could trigger riots, Gordon Brown has been warned.

“The World Bank said this week that the price of staple foods has risen by 80 per cent in the past three years. For consumers in wealthy nations such as Britain soaring prices are squeezing household finances and keeping inflation up. But for developing nations they can lead to malnutrition and social disruption.

“Food prices are being driven up by shortages of supply - often caused by bad weather - and b