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Disaster Aid and Farm Spending

I. Disaster Aid and Farm Spending
II. Doha
III. Ethanol

I. Disaster Aid and Farm Spending

Elana Schor, writing today at The Hill Online, reported that, “Democrats will seek to add billions of dollars in disaster aid for farmers to the emergency war supplemental that must pass next month, Senate Majority Leader Harry Reid (D-Nev.) said yesterday.

“Reid said he notified President Bush at a White House meeting late Wednesday that the supplemental, which could arrive in House committees just after the recess, will extend a hand to Midwestern and Western farms crushed by flooding, fires and freezes.”

The article added that, “North Dakota’s Democratic senators, Byron Dorgan and Kent Conrad, continue to push for a $4.5 billion package for farmers in their region that fell short during the waning days of the 109th Congress. Another state in search of relief is California, where Democratic Sens. Dianne Feinstein and Barbara Boxer offered a bill last week for more than $1.5 billion in compensation to farmers hurt by crop freezes.”

Peter Shinn and Bob Meyer
reported yesterday at the Brownfield webpage that, “The Senate Wednesday night passed a Continuing Resolution to wrap up unfinished spending bills left over from the 109th Congress and fund the government through the remainder of the fiscal year. The measure, worth roughly $465 billion dollars, is a stop-gap spending bill that essentially funds government agencies at the same level as in fiscal year 2006.

“As such, lawmakers who have been working to get a drought disaster aid measure through Congress weren’t able to even try to tack it onto the catch-all spending measure. But they may try to attach a drought assistance provision to an upcoming spending bill to fund continuing war operations in Iraq and Afghanistan. That’s according to Nebraska Senator Ben Nelson (D), who told Brownfield Wednesday the move will be undertaken with a good deal of caution.”

The Brownfield report indicated that, “[O]n Thursday, North Dakota Senator Kent Conrad (D) and South Dakota Senator Tim Johnson (D) reintroduced a $4.5 billion dollar drought aid bill. The measure is virtually identical to a similar bill introduced last year, a measure that enjoyed widespread bi-partisan support among Senators from states hard-hit by drought.” (For more on this bill, see this press release issued yesterday by Sen. Johnson’s office).

With respect to the House, the article explained that, “In the meantime, efforts at passing drought disaster aid are also underway in the House of Representatives. House Ag Committee Chairman Collin Peterson told Brownfield Thursday a more modest drought aid package than the Senate’s, one based on the last ag disaster relief bill that made it through Congress in 2004, would be attached to the upcoming emergency war spending bill.”

However, the article concluded by noting that, “The Bush administration has consistently warned it will veto ad hoc disaster aid.”

In a broader look at the federal budget and potential agricultural spending provisions, Senate Budget Committee Chairman Kent Conrad (D-N.D.) penned a letter to The Wall Street Journal editorial board that was published in today’s paper.

In part, Chairman Conrad stated that, “Your Feb. 6 editorial ‘Fiscal Revelation’ wrongly praises President Bush’s budget and unfairly criticizes me. It is far- fetched to claim that the president has rediscovered his ‘fiscal nerve’ with this budget.”

Sen. Conrad also pointed out that, “Your fixation on cutting assistance to our nation’s farmers and ranchers is certainly not the answer. Agriculture aid makes up less than 1% of the total federal budget. Even if we eliminated all agriculture funding this year, the savings would cover only a few months of military operations in Iraq.”

DTN’s “Washington Insider” (link requires subscription) reported yesterday morning that, “House Agriculture Appropriations Subcommittee Chairman Rose DeLauro, D-Conn., Thursday [yesterday] has scheduled the first of several hearings that will be convened in the long process of determining spending levels for USDA over the next fiscal year.

“As is the custom, the secretary of agriculture will be the featured witness at the first hearing. And, as is also the custom, panel members will take the opportunity to criticize the president’s spending proposals and to offer alternatives of their own. During this session, the secretary also will be called upon to defend perceived shortcomings and to explain the administration’s thinking on a number of current issues.

“Over the coming weeks, DeLauro will hear from other top ranking USDA officials as her committee examines each USDA area in detail. To date, DeLauro has not set a schedule for the follow-up hearings.”

On Wednesday, Ron Smith provided a more detailed look at the federal farm budget picture in an article posted at the Delta Farm Press webpage.

There, Mr. Smith reported that, “American Farm Bureau president Bob Stallman says U.S. farmers could have a new farm program by September of this year, but Congress must confront several obstacles to get a program that’s as good as the current one.

“A tight budget, competing goals of various farm interests, and maintaining political support in light of increasingly negative press top the list of hurdles legislators have to face.

“The budget may be the most daunting.

“‘They don’t do accounting in Washington, D.C., the way you do on the farm,’ Stallman said during the opening session of the 10th annual Conservation Systems Cotton and Rice Conference recently in Houston.

“‘Congress has a different set of rules it follows. For the first four months of the year, we’ll have a dollar fight,’ he said. That battle will be for far fewer dollars than were available in 2002.”

Mr. Smith indicated that, “Projected outlay for the 2002 farm legislation, through 2007, was $105.2 billion. As of January 2007, actual outlay was $80.4 billion, more than $24 billion less than projections. But instead of being rewarded for frugality, the new baseline is now significantly lower. ‘We have about $40 billion less than we had before,’ Stallman said.

“He said the new watchword from the Democrat-controlled Congress is ‘pay as you go. So any spending beyond the baseline must come from some other program.’”

The Delta Farm Press article added that, “Stallman said funding for commodity titles may not offer much of a target for plundering funds. ‘There is not that much money available there that can be moved somewhere else. That may help us some.’

“He said payment limits will return. ‘Sen. (Chuck) Grassley, R-Iowa, will be back with more amendments. But with higher grain prices, payment limitations may not save that much money.’”

With respect to payment limitations and the Bush administration’s specific proposal on this issue, Philip Brasher reported in yesterday’s Des Moines Register that, “The Bush administration’s proposal to cut off subsidies to farmers making more than $200,000 a year could affect far more operations in Iowa than first thought.

“The high prices for corn and soybeans is going to push farm incomes in the Midwest near and above that limit over the next several years, according to an analysis done for the House Agriculture Committee by economists at Texas A&M University.

“A typical 1,350-acre grain farm in the Fort Dodge area is expected to average $145,000 in adjusted gross income annually and would likely exceed the proposed earnings limit in one to two years by 2014, according to the analysis.

“A 3,400-acre farm in the Fort Dodge area would average $322,000 in adjusted gross income and likely exceed the means test five years between 2008 and 2014.

“The A&M center analyzes the potential impact of farm policy on different types of farms based on interviews with selected farmers around the country. In Iowa, they use farmers in the Fort Dodge area.”

To view a copy of the Texas A&M report, just click here.

The Bush administration Farm Bill proposals continue to be the subject of regional editorial opinion. An editorial posted yesterday at the St. Petersburg Times Online, indicated that, “You might think a tomato farmer in Manatee County has a lot in common with an Iowa corn farmer. When it comes to federal crop subsidies, however, they are worlds apart. To Uncle Sam, Florida’s vegetable and fruit growers are the unwanted stepchildren to the favored sons who grow corn and soybeans in the Midwest.

“But in a surprising reversal of decades-old agricultural policy, President Bush is proposing that the government begin to trim its wasteful farm subsidy program. In his proposed budget for the U.S. Department of Agriculture, Bush would reduce the amount going into commodity subsidies by $4.5-billion over the next decade. He would put more money into programs that actually help deserving farmers.”

Concluding, the editorial stated that, “Whether the Bush plan will survive Congress is another matter. Farm-state lawmakers and presidential hopefuls who have to make a good showing in the corn belt have resisted subsidy cutbacks in the past. Bush deserves credit for presenting a bold beginning for agricultural reform, and we hope he is serious about pushing it through a reluctant Congress.”

Meanwhile, U.S.D.A. has updated the “What they are saying,” section of their Farm Bill proposal homepage. Yesterday’s new post includes favorable editorial analysis and opinion of the executive branch’s ag policy perspective, as well as comments from U.S. lawmakers.

Not included in the update: Less positive anecdotal feedback from the EU, Brazil, Australia and India (see FarmPolicy Update Feb. 2 and Feb. 3.) These reactions to the administration’s proposals were generally viewed within the context of the Doha round of W.T.O. trade talks, and the administration has made clear that that the Farm Bill proposals were not offered within the parameters of the ongoing negotiations. Nonetheless, the proposals and the Doha talks appear to be connected in an overarching political sense.

II. Doha

Krishna Guha and Eoin Callan reported in yesterday’s Financial Times that, “Unease about globalisation among US legislators is so great that a Doha deal would probably be rejected by Congress, Barney Frank, the Democratic chairman of the House financial services committee, claimed on Thursday.

“His remarks, at the second day of testimony by Ben Bernanke, the Federal Reserve chairman, come at a moment when the administration is locked in tense negotiations with the Democratic leadership on trade policy.

“Mr Frank said: ‘My own view is that if they were in fact to come to an agreement in the Doha round that the resulting agreement – if they reach it as they are currently talking about – would not pass the House of Representatives.’

“While Mr Frank has no specific role in trade, these comments from a senior Democrat show how difficult it will be to reach a compromise satisfying rank-and-file members while keeping open the possibility of further trade deals.”

Reuters news
filed a similar report yesterday. The Reuters article explained that, “Efforts by the White House to persuade Congress to renew so-called fast-track authority for President George W. Bush to negotiate trade- promoting international deals faced only a ‘slender’ chance of passage, a senior Democratic lawmaker said Thursday.

“‘I think people should understand that the chances of an extension of trade promotion going through are quite slender at this point unless there is some change in the attitude of many who are its advocates,’ Barney Frank, chairman of the House Financial Services Committee, said at a hearing.”

Dow Jones News writer Elizabeth Price reported yesterday that, “World Trade Organization ministers have about three months at the most to make a breakthrough in the Doha round of trade negotiations, Brazil’s representative at the WTO in Geneva said Thursday.

“Clodoaldo Hugueney, speaking via videoconference at a trade forum sponsored by the U.S. Chamber of Commerce, said negotiations are ongoing both in individual meetings between countries and in larger groups. He said the collapse of the Doha talks last summer has made ministers more committed to finding ways to get around political sensitivities felt in every WTO member to get an agreement.

“‘If this doesn’t produce results in the next couple of months, in the next three months at the most, we are going to be faced again with a lack of interest in the negotiations and the possibility that the momentum that has been generated now will fail us,’ Hugueney said.”

III. Ethanol

DTN continued their series on Farm Bill Lobbyists yesterday (link requires subscription) with a focused look at Bob Dineen.

DTN writer Todd Neeley reported that, “From high atop his eighth-floor office just blocks from Capitol Hill, Bob Dineen sits behind a paper-covered desk, sleeves rolled up, as the phone rings off the hook.

“Working from the cramped quarters, the Renewable Fuels Association [RFA] president and chief executive officer shakes his head in amazement at how far the ethanol industry has come — from purely a gasoline additive to what some lawmakers say is the driving force behind the next farm bill.”

The article stated that, “What may be surprising to some is that the RFA is not taking a position on proposals that would raise the renewable fuel standard, Dineen said. Ethanol is ahead of schedule in reaching the 7.5-billion-gallon RFS outlined in the Energy Act of 2005.

“Instead, he said it might be a good idea to give the market a chance to ‘breathe’ in light of increased ethanol production. If the RFS is changed, he said, it would be done outside the farm bill under the auspices of the Department of Energy.

“‘You’re in a time right now where the market has not yet had the opportunity to respond to the tremendous increase in demand, and it will get there,’ he said. ‘But that has some constituencies, whether it is the pork producers or the dairy folks, concerned about what this market is doing to their bottom line and I do understand that.’

“With ethanol’s rapid expansion corn prices have skyrocketed to levels not seen in recent memory, with recent Chicago Board of Trade futures hovering at or above $4. Those prices are drawing concern from livestock producers who use corn in their rations.”

In more ethanol news, a Bloomberg news item from yesterday stated that, “Corn-producing states in the Midwest saw jumps in crop values in 2006, as demand for grain-based ethanol pushed up prices.

“The value of crops in Iowa, the largest ethanol producer, increased by one-third to $10.1 billion in 2006, the U.S. Department of Agriculture (USDA) said Thursday in a report.

“Crop values in Illinois and Minnesota, the second- and third-biggest ethanol producers, gained 49 percent and 32 percent, respectively, the USDA said. The increases were largely tied to corn, which generated a record $33.8 billion in 2006, 52 percent more than in 2005.”

The U.S.D.A. report from the National Agricultural Statistics Service (“Crop Values”) can be downloaded here.

Nancy Gaarder
reported in today’s Omaha World-Herald that, “The nation is on the cusp of an energy revolution, and rural America is uniquely positioned to profit, a federal official told more than 250 people Thursday in Lincoln.

“Thomas C. Dorr, undersecretary for development at the U.S. Department of Agriculture, said the high price of oil and spread of Internet technology are fueling a renaissance in rural America. Dorr was keynote speaker at a USDA conference on renewable energy.

“Because oil has become so expensive, the cost of generating renewable energy is gaining a competitive corner in the marketplace, he said.

“The spread of broadband technology also is making it possible for farmers to get up-to-the-minute information on various market forces.

“States like Nebraska face opportunities and challenges as they move down this road, Dorr said.”

Lastly today, a Dow Jones article posted at DTNAG.com yesterday, reported that, “U.S. sugar farmers may not be able to count on the current government price support program to protect them in the long-term, and they may need to look to opportunities to produce ethanol, U.S. Department of Agriculture Secretary Mike Johanns said Thursday.”

The article added that, “‘The current program over time is not going to work very well for (sugar) farmers,’ Johanns told members of the House Budget Committee.

“He said USDA proposals for the 2007 farm bill aimed at encouraging research in cellulosic ethanol would also apply to those who would like to make sugarcane and sugarbeets a commercially viable feedstock for ethanol.

“The government props up U.S. sugar prices by managing the supply, but that will get ‘tougher and tougher’ to do because of trade deals that will be opening the U.S. border to more and more imports, Johanns said.”

-Keith Good