- FarmPolicy - http://farmpolicy.com -

Farm Bill Dynamics

I. Farm Bill Dynamics
II. Ethanol
A. Political Support
B. Production & Economic Issues
III. Doha

I. Farm Bill Dynamics

The Washington Post editorial board noted in today’s paper that, “The last time Congress took a long look at America’s wasteful system of agricultural subsidies, we had to endure bushels of shallow rhetoric about how billions in largess would save the great American family farm. With this hefty crop of disingenuous sentimentality and equally hefty lobbying efforts from powerful agricultural interests, the result was a federal giveaway that did more to hurt small farmers than it did to help them.

“The law that authorizes a range of unnecessary and ill-targeted agriculture programs is set to expire in September. So expect fronts for agribusiness, rural banks and farm insurers (and the members of Congress who accept their campaign contributions) to try and sell the same line again this year: Extend the programs or nail the coffin shut on America’s heartland. It’s about time to nail the coffin on that tired line instead.

“The Post’s Gilbert M. Gaul, Sarah Cohen and Dan Morgan reported last month that federal agricultural payments are in fact fueling a rapid consolidation of American farms into enormous agribusinesses. Larger farms get much more government money, which they then use to buy up more land. This increases land prices, raising the financial barriers to starting a new farm and pressuring small farmers to leave the market. The mere fact of farm consolidation is not objectionable; indeed, many large farms are pioneering technological and procedural improvements that increase efficiency. But decisions about who should be farming what and where should be left to the marketplace; the government should not distort the market to push smaller competitors out, especially at the price of $15 billion in annual subsidies.”

Catharine Richert, writing on January 6 at the Congressional Quarterly Weekly, reported that, “Later this year, lawmakers will sit down and write the next installment of this sweeping measure that will reauthorize agriculture programs ranging from crop subsidies to conservation incentives and cost taxpayers billions of dollars a year over the next five years or so.

“When they do, the old-line farm lobby will be joined by fruit and vegetable growers, winemakers, veterinary drug companies and even anti-hunger groups, who have all spent the past five years preparing their cases to snag some of the subsidies and protections that will be handed out this time around.

“In fact, the biggest meeting room on Capitol Hill might not hold all the interests involved.”

In more detail with respect to fruit and vegetable growers, Ms. Richert noted that, “Nowhere is that more clear than in the case of a new coalition of specialty-food producers encompassing fruit, vegetable and nut growers and winemakers. Last fall, they and their allies on Capitol Hill — many of whom also are newcomers to agriculture policy — got a jump on the 2007 farm bill debate by introducing a bill that embodied their aims. The EAT Healthy America Act unites, for the first time, the traditionally divided fruit and vegetable growers and asks Congress for some of the billions of scarce taxpayer dollars that have traditionally gone to producers of the big row crops, plus cotton and dairy farmers and in more recent times to conservation.

“‘We want a bill that looks at all of agriculture, not one that just focuses on the commodities,’ said Robert Guenther, spokesman for the Specialty Crop Farm Bill Alliance.

The CQ article also pointed out that, “As U.S. agriculture has become increasingly entwined with global trade, international partners have criticized these subsidies for keeping foreign producers — particularly those in developing countries — from selling their crops in the United States. Global trade talks stalled last summer as a result of disputes between industrialized and poor nations over subsidies and tariffs.”

Adding in these factors with budgetary issues, Ms. Richert concluded that, “A tighter budget, coupled with proposals for new spending from specialty-crop groups and other new pleaders, is likely to pack a one-two punch against the major commodity growers. For example, if Congress decides to accept the proposal from the specialty-crop growers — a plan that would spend more than $1 billion a year for research and marketing grants and would require the government to purchase more fruits and vegetables for school lunches — it is likely to come at the expense of the subsidies that have been the bread and butter of the commodity-crop industry for decades.”

The CQ article also documented that Farm Bill interest has spread beyond the parameters of agricultural interests, “A couple of years ago, as staff members at the [American] Farmland Trust were laying out their plan for the next farm bill, they made a list of organizations that had a stake in the outcome and might support the trust’s aims but just didn’t know it yet. Some of the most surprising groups on the list, said Jimmy Daukas, director of farm policy for the trust, were involved in health issues.

“‘For the first time, people are approaching this from a public health point of view,’ he said. ‘They are completely new players.’

“In particular, the American Cancer Society and the American Heart Association are two of the more prominent groups backing the Farmland Trust’s push to increase spending on nutrition and health, Daukas said. They want more healthful foods in schools, and they support programs that bring fresh fruits and vegetables to inner cities.”

The CQ article also pointed out that, “Similarly, a new alliance is forming between livestock producers and food processors, both of which worry that corn ethanol research grants and government procurement mandates in the 2002 farm bill have caused corn prices to skyrocket. They have said they’ll join forces to keep provisions that favor the ethanol industry out of the next bill. And an existing alliance among Ducks Unlimited and other hunting and fishing groups and environmental organizations such as the Nature Conservancy is stepping up its effort to get more farmland enrolled in Agriculture Department conservation programs.”

The January 5 edition of the Kiplinger Agriculture Letter (Vol. 78, No. 1) also included a segment focusing on farm policy issues, “Farm interests will fare well overall in the 110th Congress. Farmers have friends on key committees. Sen. Tom Harkin (D-IA) and Rep. Collin Peterson (D-MN) will head agricultural committees nearly split along party lines. Both panels often will be bipartisan.

“Ag interests also have allies on other important congressional panels, including those with control over the purse strings in both chambers.

“But powerful ag backers face severe budgetary restraints in the face of a looming $300-billion federal budget deficit.

“Crop subsidies in the federal budget could be cut up to 40% in the five-year spending plan that will be released this spring. That’s because market prices have curbed subsidies, and the budgets start with current spending levels. A lower baseline will play a role in the debate over the new farm bill, of course, spelling a reduction from the $20 billion or so in farm subsidies to farmers in most years.

“Disaster aid also is likely to be trimmed in a new effort to help farmers recoup weather-related losses in 2005 and 2006.

“However, Congress won’t skimp on other funding for farmers, including money for biofuels, conservation and rural development.”

II. Ethanol

Ethanol and associated issues regarding market prices, production decisions, farm subsidy expenditures and research will continue to impact the nature of the debate over the future of U.S. agricultural policy. The debate will focus more narrowly on the economic impacts of increased corn production and domestic corn-based ethanol production.

A. Political Support

The “Washington Insider” Section of DTN reported on Friday link requires subscription) that, “Washington is expecting a major announcement regarding biofuels and renewable energy when President Bush delivers his Jan. 23 State of the Union address. Al Hubbard, director of the White House National Economic Council, recently predicted the State of the Union will result in ‘headlines above the fold that will knock your socks off in terms of our commitment to energy independence.’”

Brownfield’s Peter Shinn reported on Friday that, “Congress wasn’t expected to do much beyond the ceremonial when it reconvened this week. But the first day Congress came back into session, bipartisan groups of lawmakers in both chambers introduced two separate bills related to biofuels, and you can expect more such legislation to come.” (Related audio from Brownfield available here (MP3)).

And the “Washington File” (U.S. State Department) reported on Saturday that, “In her opening statement to the U.S. House of Representatives, newly elected Speaker of the House Nancy Pelosi called for: ‘A new America that declares our energy independence, promotes domestic sources of renewable energy, and confronts climate change.’

“In doing so, she signaled that the Democratic leadership sees energy policy as one of the front-and-center issues for legislative action for the 110th Congress.”

National Farmers Union President Tom Buis noted in a statement from Friday that, “I am pleased that two very important legislative bills were introduced, the first session day of the 110th Congress, to reduce our nation’s dependence on foreign oil by encouraging renewable fuels production. Since the birth of this great nation, farmers and ranchers have produced our food, and now we also have the capability to produce more of our nation’s energy.”

B. Production & Economic Issues

Associated Press writer Libby Quaid reported yesterday that, “From corn fields to Wall Street, enthusiasm for ethanol is at an all-time high. But not everyone is enthusiastic.

“Demand for the corn-based fuel is driving up the cost of feed corn, making it more expensive to feed cows, chickens and pigs.”

The A.P. story added that, “A potential split is in evidence this week during the annual meeting of the American Farm Bureau Federation this week in Salt Lake City. Farm Bureau is the country’s largest general-interest agriculture group.

“Its members still are trying to understand the consequences of the nation’s rapid expansion of ethanol.

“‘We have a bull on the loose here, and it’s going to have a lot of implications for American agriculture and our population,’ Keith Collins, the Agriculture Department’s chief economist, told Farm Bureau members Sunday morning.”

A separate A.P. story from Sunday indicated that, “Lawmakers from the region say ethanol produced from corn and new feedstocks such as switchgrass will be one of the forces driving Congress’ new farm bill.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., Rep. Stephanie Herseth, D-S.D., and Sen. John Thune, R-S.D., were among those attending the annual South Dakota Corn Growers convention on Saturday.

“‘I tell farmers, in 10 years, you’re going to be growing 25 percent switchgrass,’ Peterson said.

“Thune said research into using biomass products such as switchgrass should not adversely affect the corn-based ethanol industry.”

Doug Smith, writing on Saturday at the Minneapolis Star Tribune reported that, “Prairie grasses grown to produce ethanol could fuel a renaissance in rural Minnesota, help the nation become more energy independent and be a boon to wildlife, Rep. Collin Peterson, D-Minn., told a gathering of 220 outdoor enthusiasts here over the weekend.

“Peterson, head of the House Agriculture Committee, said Congress will begin working on a new federal farm bill soon, and that it should include a provision calling for 5 million acres to be planted to grasses or other similar plants that could be used to make ethanol.

“The current farm bill expires this year. And there is pressure to reduce or eliminate the Conservation Reserve Program, in which millions of acres of marginal farmland has been idled and planted to grass. CRP acres have been credited with boosting wildlife, such as pheasants, waterfowl and deer, as well as helping reduce pollution of lakes, streams and wetlands. Minnesota currently has about 1.8 million acres enrolled in CRP.”

The Star Tribune article added that, “‘What we’re going to be doing with this farm bill is trying to set the stage for the next generation of ethanol, which is cellulosic ethanol,’ Peterson said. Creating a new cellulose-fueled ethanol industry could transform rural America, he said.

“‘I really believe we’ll have people moving back to our rural counties. And if we have 25 percent of our [current] corn and soybean acres in grass, think about what that will do for wildlife. It’s going to be phenomenal.’

“Other speakers discussed those possibilities, but many questions remain.

“‘Can the cellulosic industry exist without a subsidy?’ asked Steve Taff, an economist at the University of Minnesota. And, he added: ‘We haven’t a clue how to grow prairie grass on an industrial scale. Not a clue.’”

Environmental Working Group President Ken Cook noted yesterday at The Mulch Blog that, “The question for this post: is corn-based ethanol a transition, or an enduring endpoint?

“The pluses of switchgrass are usually enumerated from the farmers’ (and ostensibly the environmentalists’) standpoint: it’s a perennial plant (doesn’t have to be planted every year like corn), requires less herbicide and fertilizer (corn uses both prodigiously), controls erosion, and provides habitat for wildlife. Plus it captures carbon dioxide instead of emitting it, and sequesters carbon in its root system. From those standpoints, and several others, it is superior to corn and far superior to oil as a fuel stock.

“But switchgrass-based ethanol does not hold the same attractions for agricultural input suppliers. If you’re in the business of making and selling seed and herbicides every year, especially seeds you’ve bioengineered to sprout plants that resist your herbicides, a massive shift to a perennial crop that doesn’t have to be reseeded each year and requires next to no herbicide for its culture is not exactly an attractive turn of commerce.”

At the update’s conclusion, Mr. Cook noted that, “One more factor favoring corn: have you ever heard of the powerful switchgrass lobby?

“If this is the direction the ethanol economy takes–corn as the cellulosic feedstock of choice–we have to ask if we are looking at the technological equivalent, in biofuels, of the old, dirty, coal-fired power plant or the infernal combustion engine? Will we be stuck with a first-generation system that does indeed provide energy, but at a high environmental cost, and that becomes extremely difficult to displace with smarter, cleaner, more efficient systems down the road?

“Even if you see positives in the ethanol revolution that’s underway, as I do, there are many more questions to ask about it, including the questions my friend Lester Brown has been raising.

“But clearly one of the central policy issues in the 2007 farm bill will be how to make the transition happen from grain ethanol to a more sustainable biofuel economy.”

Doug Cameron reported in Friday’s Financial Times that, “Monsanto, the US biotechnology company, yesterday provided a bullish assessment of how a new generation of genetically modified corn will meet soaring demand for the crop’s use as an alternative fuel.

“The ability of Monsanto and its rivals to improve agricultural productivity is viewed as a crucial element in the debate over the competing uses of corn as a foodstuff and to produce ethanol, a cleaner-burning gasoline additive. Monsanto pointed to rising sales of its existing GM corn seeds, which boost yields and provide protection against drought and pests.

“It said its product pipeline could provide a ‘step change’ in the productivity of the crop, as well as for soyabeans, which are used to produce biodiesel in the US.”

The FT article added that, “US farmers are shifting acreage from soyabean and other crops to corn to capture the rise in price generated by a national energy policy that aims to boost ethanol production from less than 5bn gallons last year to 7.5bn by 2008.”

The National Corn Growers Association issued a release on Friday, which noted that, “Once again the National Corn Growers Association (NCGA) addressed the charges of biofuels critics, reminding consumers that the nation’s corn growers can meet the rising demand for food and fuel.

“In his ‘Eco Update’ on ethanol demand for grain, Lester Brown of the Earth Policy Institute alleged that demand for ethanol will grow faster than corn production, causing shortages and high prices. The claim is false, said Rick Tolman, CEO of the National Corn Growers Association.

“‘Lester Brown continues to foster fear and increase rhetoric,’ Tolman said in his response. ‘Interestingly, he has become an ‘expert’ on ethanol and biofuels yet he has failed to consult with the true experts in this dynamic field. Had he done so, he would know that indeed we have a very clear picture of the grain requirements for ethanol.’

“In an interview with National Public Radio, Tolman explained that ethanol is not diverting corn from feed and food markets. In 2006 corn growers produced the third-largest crop at 10.7 billion bushels.” (To listen to a N.C.G.A. audio report on this issue, just click here (MP3)).


Eoin Callan, writing in yesterday’s Financial Times, reported that, “Negotiations between the US and the European Union have revived hopes that a deal can be struck on the stalled Doha round of world trade talks by the end of the month, according to EU and American officials.

“Top US and EU negotiators have told the Financial Times they hope to achieve a breakthrough in the coming weeks, paving the way for an agreement with Brazil and India at the World Economic Forum in Davos this month.

“The proposed deal would be a last-ditch attempt to revive the Doha round before a US law enhancing President George W. Bush’s authority to negotiate trade pacts expires later this year.”

The FT article added that, “Peter Mandelson, the EU’s trade commissioner, told the FT that the US and EU were closer to an agreement than is commonly thought. ‘After a series of meetings of senior officials it is clear that the gap between us on agriculture is no longer such to dismiss hope of a successful outcome. We are not that far apart to give up on the process.’”

-Keith Good