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Washington Post: "Harvesting Cash" Series Continues

I. Post: Harvesting Cash
II. President Bush on Ethanol
III. Appropriations Issue- Conservation
IV. Brazil
V. Australia

I. Post: Harvesting Cash

Gilbert M. Gaul, Sarah Cohen and Dan Morgan continued their Washington Post series, “Harvesting Cash,” with an update published in today’s paper entitled, “Federal Subsidies Turn Farms Into Big Business.”

“The cornerstone of the multibillion-dollar system of federal farm subsidies is an iconic image of the struggling family farmer: small, powerless against Mother Nature, tied to the land by blood,” the authors noted.

“Without generous government help, farm-state politicians say, thousands of these hardworking families would fail, threatening the nation’s abundant food supply.

“‘In today’s fast-paced, interconnected world, there are few industries where sons and daughters can work side-by-side with moms and dads, grandmas and grandpas,’ Rep. Jerry Moran (R-Kan.) said last year. ‘But we still find that today in agriculture. . . . It is a celebration of what too many in our country have forgotten, an endangered way of life that we must work each and every day to preserve.’”

However, the Post article indicated that, “The very policies touted by Congress as a way to save small family farms are instead helping to accelerate their demise, economists, analysts and farmers say. That’s because owners of large farms receive the largest share of government subsidies. They often use the money to acquire more land, pushing aside small and medium-size farms as well as young farmers starting out.”

More specifically, the article stated that, “Large family farms, defined as those with revenue of more than $250,000, account for nearly 60 percent of all agricultural production but just 7 percent of all farms. They receive more than 54 percent of government subsidies. And their share of federal payments is growing — more than doubling over the past decade for the biggest farms.”

The article also noted that, “Nevertheless, just last year the government paid out about $15 billion in income support or price guarantees, which increasingly are going to the largest farms — those with annual sales of $500,000 or more. Between 1989 and 2003, the share of federal payments for those farms jumped from 13 percent to 32 percent while the share going to small and medium-size farms — those with $250,000 or less in sales — dropped from 63 percent to 43 percent.

“In 2003, the owners of the biggest family farms reported an average household income of $214,200, more than three times that of U.S. households on average. ‘Farm households are not, in general, poor,’ government researchers concluded.”

The Post article provided an interesting, in-depth look at the way two farmers approach the business of agriculture and expressed how they view farm policy- one of the farmers is from here in central Illinois, while the other is from Iowa.

The authors pointed out that farmland values have been impacted by federal farm subsidies and quoted the featured producer from Illinois as saying, “‘I’m not proud of it,’ he said. ‘I would like to have the moral courage and financial clout not to take them [subsidies]. But if I don’t, I won’t be able to compete when it comes time to bid for land.’

“[John Phipps of Chrisman, Ill] knows that this fuels the rising cost of farmland; an acre of land there now sells for about $4,800. ‘When I belly up and write a check, I am perpetuating the problem,’ he said. ‘For the most part, all of the smaller farmers have all been flushed out in the last five years.’”

In conclusion, the article quoted the featured producer from Iowa, Thomas Oswald, and noted that, “Oswald chose to remain smaller, he said, explaining that he does not ‘want to muscle out neighbors’ for land and is conservative about taking on too much risk. And although he may be small, Oswald stressed, he is not backward. ‘That’s an image they use in Washington to sell these programs,’ he said. ‘It’s an emotion argument — political.’”

In a breakout article, “A Big Farm, but Not So Big It Could Get By Without Subsidies,” which was published on page A8 of today’s Post, Gilbert M. Gaul reported that, “While some farmers and agricultural experts see a downside to farm subsidies, others say the payments are a fair way to help out farmers in need. ‘Some years, that’s probably what I live on,’ Steve Loschen said. ‘Honest to goodness. It helps me stay current on equipment payments and helps pay for my health care. It pretty much covers my family living expenses.’

“Loschen, 40, grows corn, wheat and soybeans on more than 1,500 acres in Franklin County, Neb., about 30 miles from the Kansas state line. In the past five years, he has received nearly $300,000 in government payments and disaster aid. ‘Really, if you look at the average of what I have received, I am at the middle to bottom of individuals who actually made their livelihood on the farm,’ he said.

“Loschen draws a distinction between landlords who capture government payments without farming and full-time farmers such as himself who assume all the risks of growing a crop. ‘This is not welfare for me,’ he said. ‘I’m not trying to get rich. I’m trying to make a living. My definition of a family farmer is they’re the guys who are actually doing the work.’”

Mr. Gaul also reported that, “In recent months, prices for corn have shot up dramatically, in part due to the growing demand for corn-based ethanol. Prices have been running about $3.50 a bushel, more than $1.50 a bushel above last year’s prices, Loschen said. He estimated that farmers need $2.75 a bushel to cover their costs. ‘We can make a living at these prices,’ he said.

“But there is no guarantee that those prices will last. The ethanol boom could go bust. And the number of family-owned farms in Franklin County and Nebraska is declining, as the remaining farms get bigger. At 930 acres, the average size of a Nebraska farm is more than twice the national average. Federal agricultural subsidies are also growing, up 6 percent since 1997, government data show.

“‘There’s no way you can just go ‘click’ and there will be no more farm payments. Everybody like me would be broke,’ Loschen said. ‘Ideology got us to this point. We need a new ideology to take us back to where we need to be.’”

II. President Bush on Ethanol

President Bush held a press conference yesterday in which he discussed a wide range of topics—including ethanol and renewable fuel.

Specifically, President Bush stated that, “The American people expect us to keep America competitive in the world. So we must work to ensure our citizens have the skills they need for the jobs of the future, and encourage American businesses to invest in technology and innovation. The American people expect us to reduce our dependence on foreign oil, and increase our use of alternative energy sources. So we must step up our research and investment in hydrogen fuel cells, hybrid plug-in and battery-powered cars, renewable fuels like ethanol and cellulosic ethanol and biodiesel, clean coal technology and clean sources of electricity like nuclear, solar and wind power.”

Later, in response to a reporter’s question, President Bush noted that, “I’m pleased with the fact that we’ve gone from about a billion gallons of ethanol to over 5 billion gallons of ethanol in a very quick period of time. It’s mainly derived from corn here in the United States. But there’s been great progress. And we need to continue to spend money on cellulosic ethanol. That means that new technologies that will enable us to use wood chips, for example, or switch grass as the fuel stocks for the development of new types of fuels that will enable American drivers to diversify away from gasoline.”

“My only point to you is we’ve got a comprehensive plan to achieve the objective that most Americans support, which is less dependency upon oil,” the President said.

III. Appropriations Issue- Conservation

Loni Kemp, writing in the November issue of The Conservation Planner (a publication of the Minnesota Project), noted on page two that, “When Congress finalizes agriculture appropriations for 2007, [the Conservation Security Program (C.S.P.)] will be one of the big decisions they face. Vastly different recommendations are before them. The President for the first time recommended full funding with no cap for 2007 —estimated by the Office of Management and Budget at $342 million. The House inexplicably did not accept that recommendation but instead approved only $280 million. The Senate Subcommittee, as they have every year, approved full funding with no cap —which the Congressional Budget Office estimates at $372 million. When the full Senate approves that recommendation, the stage will be set for the conference committee to battle it out.

“If the negotiating range is only from $280-372 million, one might ask why the higher number is so important. The answer lies in the way CSP accounting is done. All current enrolled contracts must first be paid their annual payment out of the year’s funds. With the upgrade process for 2005 contracts already completed, USDA estimates that $300–330 million is required to meet current obligations. The House funding level inevitably would mean no new signups for 2007.”

At the end of her segment, Ms. Kemp stated that, “In the context of heated farm bill debates about how to make our farm policy trade friendly, a vibrant Conservation Security Program will shine out as a policy that rewards farmers for how you farm, not what you farm. It will be perceived as a popular, effective, proven and growing program recognized for its potential to resolve multiple policy challenges. And Congress will finally have the chance to fully and dependably fund stewardship payments as the new direction for US farm policy.”

IV. Brazil

Dow Jones writer Kenneth Rapoza reported yesterday that, “Brazil will continue with record trade surpluses next year thanks to agricultural exports, the country’s Agriculture Minister said Wednesday.

“Brazil’s agriculture exports, which include paper and pulp and ethanol as well as traditional farm commodities such as soy and coffee, account for 90% of Brazil’s current $44 billion trade surplus, Agriculture Minister, Luis Guedes Pinto, said in a press statement.

“Brazil has a $42.5 billion trade surplus in the agricultural markets as well, importing some $6.5 billion worth of farm goods and exporting $49 billion worth.

“Brazil’s agriculture export values have nearly doubled since 2002 on increasing demand from overseas markets for commodities. In 2002, Brazil exported $24.8 billion worth of agricultural goods.”

V. Australia

A U.S. Department of Agriculture news release yesterday stated that, “Agriculture Secretary Mike Johanns today announced the immediate suspension and proposed debarment of AWB Limited, formerly the Australian Wheat Board, and its affiliates from participating in U.S. government programs and contracting with the U.S. government.

“USDA’s Foreign Agricultural Service (FAS) is taking action against AWB Limited, 11 individuals, and a Minnesota-based company because sufficient evidence exists to suspect that they engaged in bribery, kickbacks and similar behavior resulting in payments to the Saddam Hussein regime.

“‘We have a duty to protect the public interest by ensuring the firms and individuals with whom we do business abide by the law,’ said Johanns. ‘We have taken this immediate step based on evidence of illicit activities and, in some cases, evidence of attempts to conceal those activities.’”

Bill Tomson and Ray Brindal followed up on this news with an article that was published in today’s Wall Street Journal.

The article explained that, “AWB (USA) Ltd., a U.S. unit of AWB Ltd., formerly the Australian Wheat Board, in the past used U.S. subsidy programs such as export-credit guarantees to facilitate trade.”

Concluding, the Journal stated that, “An Australian inquiry by retired state judge Terence Cole found the wheat exporter might have broken several Australian laws, including criminal and banking codes, by making payments to the Iraqi regime between 1999 and 2003 in breach of U.N. sanctions. The inquiry cleared the Australian government of any wrongdoing. The taxation office, in its audit for the four years ended Sept. 30, 2004, accepted that the reasons set out in the Cole report for AWB’s payments didn’t ‘constitute bribes to foreign public officials’ for the purposes of income-tax assessment.”

-Keith Good