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FT: Doha Analysis

I. Doha
II. Canadian Corn Case
III. Farm Bill: News and Perspectives
IV. Cold Weather Harms Crops

I. Doha

Eoin Callan, writing in today’s Financial Times, reported that, “George W. Bush left US and European Union trade negotiators in no doubt about what he expected when they met to discuss the deadlock over the Doha round of the world trade talks.

“A US diplomat said of last week’s Oval Office meeting: ‘He [Mr Bush] was staring Peter Mandelson in the eye and his own trade representative in the eye and saying: ‘Get this done.’ That kind of face-to-face with the president doesn’t happen very often.’

“Following her president’s instructions, Susan Schwab returned to the negotiating table with Pascal Lamy, World Trade Organisation director-general, who called a halt to the Doha round last year amid a stalemate over agricultural policy.”

Drip irrigation creates icicle coverings in effort to insulate oranges against an unusual cold snap (The New York Times).

After a note about the Democratic majorities’ perspective on trade in the new Congress, the FT article pointed out that, “The party is wary, however, of prematurely committing members of Congress from rural states to a package likely to be unpopular with the powerful agricultural lobby.”

Near the conclusion of the article, Callan explained that, “Sandra Polaski, at the Carnegie Endowment, said: ‘The administration and the previous Congress played to the agricultural lobby and farm states – which are swing states. This is how we got into the present bind.’

“To get out, she said, required a bipartisan bargain so neither party could be blamed for supporting a package at odds with agribusiness interests. The key to such a bargain was renewal of the president’s enhanced trade promotion authority. Republicans view it as a valuable foreign policy tool for fast-tracking bilateral deals with allies.”

Dow Jones writer Juliane von Reppert-Bismarck reported yesterday that, “Business groups from across the globe Monday called on world leaders to seal a framework for a world trade deal by April.

“Negotiators at the World Trade Organization must restart stalled talks ‘with more flexible offers and the goal of achieving agreement on the core elements of an ambitious and balanced outcome within the next two-three months,’ the business coalition said in a statement.

“The group consists of 19 business associations from the U.S., Europe, Canada, Brazil, Australia, China, India, Japan and South Korea.

“‘Failure (to achieve a world trade accord) is simply not an option. This unified voice is an unmistakable signal of what is at stake,’ the statement said.”

In a related item regarding agricultural trade, the U.S. Department of Agriculture’s Economic Research Service indicated last week that, “The value of U.S. agricultural exports in November was $13 million below the October record of $6.9 billion. Grains accounted for most of the increase, notably from corn as soybean exports fell from October levels. With only 1 month remaining in calendar year 2006, exports are at $64.4 billion, about 12 percent higher than in 2005. Corn and meat exports showed the strongest growth over last year. Japan, Mexico, and South Korea continue to account for more than half the U.S. corn shipments; nearly one-fourth of November shipments went to Japan. High-value products increased about 9 percent above this time last year.

“The value of U.S. agricultural imports rose only 2 percent from October to November, to nearly $5.7 billion. Year-to-date imports are $59.8 billion, roughly $6 billion higher than the first 11 months of calendar year 2005. Most of the increase comes from fruit, vegetable, and vegetable oil imports, although there were continued increases in wine, malt beverages, sugar, and rubber. Both the volume and the value of coffee are higher than at this point in 2005.”

II. Canadian Corn Case

Reuters writer Missy Ryan reported last week that, “Canada’s decision this week to challenge U.S. farm subsidies is a worrying move for U.S. farmers, but it’s unclear whether the dispute will affect a pending rewrite of U.S. farm policy and faltering global trade talks.”

“Ken McCauley, a corn farmer from Kansas and president of the U.S. National Corn Growers Association, said he hoped the two countries could settle the issue in the consultation period. But he’s not optimistic,” the article said.

Ms. Ryan added that, “‘We’re disappointed the Canadians would try to do this now,’ [Chris Garza, director of congressional relations for the American Farm Bureau Federation] said. ‘We’ve obviously been focused on WTO and trying to find a way to get the negotiations out of the mud. What the Canadians have done will just stymie that process.’”

Michael Gifford, who served as Canada’s chief agricultural trade negotiator, and principal agricultural trade policy advisor to the ministers of agriculture and trade, posted an update at the Trading Ideas Blog regarding this issue last week.

In part Mr. Gifford noted that, “Canada is raising at least three distinct issues:
–first, the US corn program has caused serious prejudice to Canadian corn producers;
–second, US export credit programs constitute illegal export subsidies;
–and third, the US has exceeded its WTO commitments regarding the most trade-distorting forms of domestic support.

“The complaints regarding the corn program and export credits mirror those which were successfully challenged by Brazil in the WTO cotton case, whereas the complaints regarding total trade-distorting support highlight a new source of vulnerability for the main US farm support programs. However, the real significance of the Canadian action is not so much related to its legal merits as it is to the signal that it sends to the US Congress that a de facto extension of the 2002 Farm Bill when it expires this year is not a sustainable option. The experience of the EU in reforming its Common Agricultural Policy illustrates that it is possible to change even the most politically sensitive farm programs so as to reduce their negative trade impacts. How much Congress decides to spend on supporting the rural sector is solely a US domestic political decision. How Congress decides to support has international consequences.”

An item posted last week at The Gazette (Montreal) noted that, “Whatever the domestic political implications, all Canadians should welcome this Canadian support for less government meddling in farm markets. Worldwide, rich-country pampering of farmers both robs consumers and prevents poor-country farmers from exporting to the rich world. Persistent U.S. and European kowtowing to farm lobbies has ruined the Doha round of world trade talks, which was supposed to bring hope, via access to markets, to Third World producers.

“At the global level, U.S. farm subsidies are no worse than Europe’s. For that matter Canada, with its floor prices on dairy and poultry products, doesn’t have clean hands, either, although our offence is much smaller.

“It is Canadian grain farmers, not African cotton producers or Caribbean sugar growers, that the Canadian government is defending here. But in speaking for our own producers we speak, too, for producers of farm products in the Third World. Every measure that embarrasses U.S. lawmakers into rethinking their absurd, damaging subsidies is more than welcome.”

III. Farm Bill: News and Perspectives

Dan Looker, writing last week at AgricultureOnline (agriculture.com), reported that, “Senate Agriculture Committee chairman Tom Harkin (D-IA), who remains a strong supporter of putting a firm cap on commodity program payments, said Thursday that he may not include a strict payment limit in the farm bill he will submit to his committee.

“‘We’ll have a vigorous debate. We’ll probably have it in the committee and we’ll have it on the floor (of the full Senate),’ he told reporters Thursday.

“Harkin was asked to respond to a comment that House Agriculture Committee Chairman Collin Peterson made at the Farm Bureau convention in Salt Lake City this week. Peterson said passing a farm bill would be difficult without support from Southern members of Congress, who have opposed capping program payments.”

Mr. Looker added that, “Harkin said that ‘in a sense, he’s right’ referring to Peterson’s recognition of the regional politics of the payment limits issue. Some large commercial corn and wheat farmers would be affected by a firm cap, but cotton and rice farmers are likely to be the hardest hit. If Harkin left this issue out of his bill, it might make writing a new farm bill easier.”

Babe Winkelman, writing in last week’s Pilot-Independent (Minnesota) noted that, “Historically speaking, farm bill conservation programs have either paid cost-share payments to farmers to fix environmental problems or rental payments to retire sensitive cropland (see the Conservation Reserve Program, the nation’s workhorse natural-resource program).

“But the Conservation Security Program (CSP) is different. Enacted in the 2002 farm bill, the CSP compensates farmers who are already doing a good job of protecting and maintaining natural resources on their working agricultural lands. The program rewards those who are farming ‘clean and green,’ as many say, with annual payments and increasing financial incentives that are intended to keep producers farming in a way that benefits soil, water, air and wildlife habitat.”

Winkelman went on to note that, “For his part, [agricultural producer Bill Gorman] wants farm policy and land and water stewardship to work hand in hand, for the betterment of the public good. He thinks the CSP model strikes the right note.

“‘We have to get out of the business of subsidizing only a few crops like corn and soybeans, because the current system is really only benefiting corporate agriculture,’ said Gorman, who is not enrolled in the CSP because he does not live in a qualifying watershed.”

Environmental Working Group President Ken Cook, writing last week at The Mulch, highlighted a different issue with respect to conservation payments: Equitability.

“Agriculture Secretary Johanns, among others, has been talking a great deal about the need for a 2007 farm bill that is fairer–more equitable–so that public funds don’t end up so overwhelmingly in the hands of a relative few very large, subsidy crop farming operations year after year after year.

“Conservation programs are central to that aspiration.”

Mr. Cook included an illustrative graph from a recent Amber Waves (U.S.D.A.) article to support his assertion.

The Mulch update also reminded readers that, “Unlike commodity subsidies, over 90 percent of which go to producers of just five crops (cotton, rice, corn, wheat and soybeans), conservation programs are available to all farmers.”

Elton Robinson, noted last week at the Delta Farm Press webpage that, “There is an old axiom in life that is an effective comment on the act of meddling — if it ain’t broke, don’t try to fix it. This advice could be applied to the writing of a new farm bill, according to Paul Combs, a rice, cotton, wheat and soybean producer from Kennett, Mo.

“Combs, who serves on the Missouri Rice Council and as chairman of the USA Rice Federation’s Rice Producers’ Group, says the rice industry ‘is really happy with the current bill. It provides counter-cyclical payments when prices are low, and payments aren’t paid out when prices are good.’

The article indicated that, “‘We think it’s a balanced and fair approach and it works for the rice industry.’

“That’s one reason Combs is advocating extension of the current bill. ‘But whatever happens, we think we should use the 2002 bill as a template to start from, especially in regard to the commodity title.’”

Gary Truitt, noted recently at the Hoosier Ag Today webpage that, “Delegates from Indiana Farm Bureau along with members from 49 other states, voted to support a new concept in farm policy for the 2007 Farm Bill. After only minimal discussion, the policy making body for the nation’s largest farm organization voted to drop a policy plank calling for an extension of current farm policy. They replaced it with support for a revenue-based safety net for farmers. ‘With $3.50 corn no one is thinking about a safety net, but we have to make sure one is there when farmers need it,’ said Randy Kron, a Vanderburgh County farmer and Vice President of Indiana Farm Bureau.”

U.S. Representative Mac Thornberry (R- 13th District of Texas), in a piece appearing over the weekend in the Amarillo Globe News, noted in part that, “Agriculture always has been an issue in which differences were not so much Republicans vs. Democrats as urban vs. rural. That gap is widening. Efforts to pit one segment of the agriculture economy against another have led to regional differences about farm policy, often dividing segments of the industry.

“This year a new farm bill is to be written, and a number of important issues affecting livestock may be addressed. With fewer and fewer members of Congress coming from agricultural areas, much less having any personal background in agriculture, those of us from producing areas will have to renew efforts to work together more closely.”

Scott Wente, writing on Sunday at the Grand Forks Herald webpage (North Dakota), in an article entitled, “Upper Midwest Democrats gain clout,” pointed out that, “Freshman Rep. Tim Walz is still getting his bearings in Washington, but he predicted area farmers won’t get shortchanged in the 2007 farm bill.

“‘I think it’s probably the best we’ve ever had,’ the 1st District Democrat said of committee representation.

“Walz will serve on fellow Minnesota Rep. Collin Peterson’s House Agriculture Committee, while Sens. Norm Coleman and Amy Klobuchar have seats on the Senate Agriculture Committee. That committee’s chairman is Sen. Tom Harkin of Iowa.

“‘We have a lot of clout,’ Klobuchar said while sitting in her temporary Capitol Hill office.”

In a related article, Brady Aaverill reported in last week’s Minneapolis Star-Tribune that, “Minnesota Democratic Sen. Amy Klobuchar has hired the former president of the National Farmers Union as her key adviser on agriculture policy as Congress prepares to write a new farm bill.

“Klobuchar, a member of the Senate Agriculture Committee, said David Frederickson will serve as her agricultural outreach director and will be based in Minnesota, spending much of his time meeting with agricultural groups and farmers.”

George Diepenbrock, reported in Sunday’s Lawrence Journal-World (Kansas) that, “Members of the Kansas delegation to Congress know most of their work this year will involve reauthorization of the Farm Bill.

“‘It’s going to be a tough row to hoe. There’s already been quite a bit of criticism in the national media,’ said Sen. Pat Roberts, R-Kan.”

The article also noted that, “‘From a Congressional perspective, I feel better with the new leadership of House and Senate agriculture committees than I did last year,’ [Kansas Agriculture Secretary Adrian Polansky] said.

“In the U.S. House, Jerry Moran, R-Hays, and Nancy Boyda, D-Topeka, have spots on the agriculture committee. Roberts also has one in the Senate.”

Brownfield’s Bob Meyer reported yesterday that, “For the first time in years, Wisconsin has a member of the House Agriculture Committee. Freshman Democrat Steve Kagen of Appleton said this was one of his top priorities when running for the seat vacated by Mark Green. ‘There’s a farm bill coming up and I thought it was real important to my district that they have a voice.’ Along with that effort, he hopes to get funding for the Milk Income Loss Compensation (MILC) program for August, ‘The Congressional Budget Office is going to set a new base line during that month.’ If there is no funding for MILC at that time, there would be no dollars budgeted for it in the next farm bill. Kagen says he supports an effort to get rid of the federal milk marketing order system but if we can’t, then he would like to see California brought in, ‘If it’s going to continue to exist, at least we have to fix it and bring everyone into it.’ He also believes the next farm bill should place much more emphasis on conservation and the further development of renewable fuels like cellulosic ethanol.

“Kagen is an M.D. and made rural health care a main issue of his campaign.”

Neal R. Peirce, in an item that was posted on Sunday at the Houston Chronicle webpage, indicated that, “Most farm economists expect that the reauthorization, which Congress has to pass this year, will mirror the same-old subsidies. But not Rep. Earl Blumenauer, D-Ore. He’s urging the Democratic House leadership to take on the challenge of major farm bill reform, insisting it’s just as important as new energy legislation and ‘may have more impact, dollar for dollar, acre for acre, than the transportation bill.’

“A bipartisan accord with President Bush on farm reform is possible, Blumenauer said last week: ‘Now the president is in a different situation (from 2002). It’s all about legacy now.’”

Mr. Peirce also noted that, “Some major farm interests will also be pushing for change, says Jimmy Daukas of the American Farmland Trust — a potential coalition of fruit, vegetable and nut producers who now receive zero benefits; ranchers; the little-helped farm interests of California, the Northeast and Mid-Atlantic; corn producers open to new approaches; even reform voices in the top Farm Belt states.”

IV. Cold Weather Harms Crops

Jesse McKinley and David Karp reported in today’s New York Times that, “Farmers braced for the worst on Monday, as a persistent cold snap seemed likely to deal a serious blow to the billion-dollar California citrus industry.

“State officials said there was no clear way of knowing at this point how much damage had been done by the freeze, which has sent temperatures plunging into the teens and 20s from Eureka in the north to near the Mexican border for several nights.

“Farmers in some sections of the Central Valley, the 400-mile-long agricultural engine, and farther south reported near complete losses of fields of oranges, lemons and other citrus.

“The state’s food and agriculture secretary, A. G. Kawamura, said the damage appeared even more widespread than that from a freeze in December 1998 that cost growers $700 million.”

Sharon Bernstein, David Pierson and Jerry Hirsch reported in today’s Los Angeles Times that, “As much as 70% of oranges still on California trees may have been destroyed by record cold temperatures across the state, officials and farmers said Monday.

“It will take days to make a full assessment of the losses to the $1.1-billion orange crop.”

-Keith Good