I. Farm Bill Editorials
II. Planting Decisions
I. Farm Bill Editorials
Yesterday, the Los Angeles Times editorial board stated that, “Americans pay about double the world market price for sugar, a hidden tax that hurts everyone with a sweet tooth. Many beverage and food makers catering to that sweet tooth have long used corn syrup instead of sugar because it’s cheaper, but the price of corn syrup is beginning to rise. So now would be a good time for the U.S. government to revisit its destructive farm policies.
“This is a classic case of a narrow, vocal lobby — sugar growers — benefiting at the expense of the larger economy. The latest victim of high-priced sweeteners is Atlanta-based Coca-Cola Enterprises Inc., the largest bottler of Coca-Cola products, which announced last week that it would cut 3,500 jobs because of a $1.1-billion loss in 2006. Other soft-drink makers, confectioners and food companies also pay a steep price for the complex system of price supports and import quotas aimed at protecting U.S. sugar growers by insulating them from global market realities.
“More U.S. food makers probably would use sugar rather than corn syrup if they could pay the real market price for sugar and have access to more of the sweetener. Compounding the awful distortions created by the current quota system is the fact that corn syrup prices are rising so sharply because more of the U.S. corn crop is being diverted to make ethanol, which makes little sense because ethanol can be made much more efficiently from — you guessed it! — sugar. It’s hard to even keep track of all the ways in which the nation’s sugar protectionism is damaging.”
The L.A. Times opinion piece also stated that, “If there is any light at the end of this tunnel, it may come from President Bush, whose energy initiatives would boost production of ethanol and probably push corn syrup prices higher. That could prompt beverage and food companies in search of a cheaper alternative to corn syrup to join the fight against the sugar lobby. Common sense doesn’t go far when it comes to farm policy; maybe corporate lobbyists can do better.”
For additional analysis of the sugar issue and trade, see “Free Trade for U.S. & Mexican Sugar in 2008,” which was authored by Ross Korves and posted on Friday at the Truth about Trade and Technology webpage.
Mr. Korves noted that, “Sugar production and trade for the U.S. and Mexico will receive increased attention with the approach of full implementation of NAFTA on January 1, 2008. This is not a textbook case of two market based industries in neighboring countries opening their markets to each other, very few of those cases exist in the world. The challenge in the real world is to take existing government policies and work with them in a framework of free trade.”
The New York Times editorial board noted on Saturday that, “Six months ago, it was an even bet whether there would be a new farm bill in 2007. The big commodity farmers, and the interest groups that represent them, were hoping that Congress would simply extend the 2002 Farm Bill, a regressive grab bag for big agriculture. These hopes have now been disappointed. Mike Johanns, the secretary of agriculture, has unveiled his proposals for a new farm bill, which on the whole seems remarkably promising.
“Mr. Johanns seems to have little desire to protect entrenched subsidies and a very strong desire to improve the environment. The question is whether Congress will listen to him or to the lobbyists.”
The editorial noted that, “The bill would make it easier for farmers to enroll in conservation programs and protect conservation acreage from the urge to plow it up when prices skyrocket. The bill could also turn out to be one of the administration’s more innovative energy initiatives. Implicitly recognizing that corn ethanol needs no more subsidies, it offers incentives to grow grasses that could be turned into another fuel called cellulosic ethanol.
“There is much to applaud in this bill. Then again, there was much to like about the last farm bill, and we know what happened to that. Congress left many of the old subsidies intact, and failed to nourish the conservation programs. We are hoping the new Congress will have the good sense to reverse the policies that have done so much damage to rural America, and in doing so offer hope to its small farmers.”
II. Planting Decisions
Also on Saturday, Bloomberg news writer Bruce Blythe reported that, “U.S. ethanol prices increased to the highest in a month on stepped-up consumption of the corn-based gasoline additive.
“Demand is outpacing supply even with U.S. ethanol companies increasing production to record levels, said Sal Gilbertie, an energy trader for Fimat USA in New York. Refiners and fuel blenders are using ethanol to replace methyl tertiary butyl ether, or MTBE, a rival additive that was phased out last year.
“‘We’re still in a near-term supply crunch for ethanol,’ Gilbertie said. ‘There still isn’t enough ethanol to meet the demand on a daily basis. Production hasn’t caught up.’”
The ethanol dynamics will also be impacting planting decisions this spring. Angie Poynter reported today at Barron’s Online that, “The other knot in cotton is the expected drop in acreage for the coming crop. At its annual meeting in Texas, the National Cotton Council said a survey of cotton producers in 17 states indicated that total 2007 U.S. cotton area would be 13.2 million acres, a 13.6% drop from the previous year. Acreage is being switched to higher-priced crops such as corn, which has traded at 10-year highs lately, or soybeans, which have hit one-and-a-half year highs. Cotton prices, by contrast, have sunk below last year’s levels. Friday, March cotton futures closed at 54 cents a pound at the New York Board of Trade.”
Nancy Cole reported in Friday’s Arkansas Democrat Gazette that, “Because cotton prices are poor, farmers are expected to plant fewer acres of cotton this year, [Bill Herrington, president of Price Risk Management Group, a private commodities brokerage firm based in Little Rock] said.
“What they will plant instead, however, is far from certain.
“‘Everybody’s trying to figure out the acreage shifts this year, more importantly corn and soybeans on a national level,’ Herrington said. He added that official word will come with the March 31 planting intentions report from the Agriculture Department.
“The Midwest region — north of Arkansas — has only two major crops, corn and soybeans. More of one means less of the other, and most experts expect a shift toward corn and away from soybeans because of ethanol producers’ demand for corn.
“‘Down here, with more crops, it’s not such a straightforward relationship,’ Herrington said.
“‘We may see somewhat marginal land go more toward grain sorghum,’ and away from soybeans, he said.”
The article indicated that, “Although grain sorghum prices tend to track corn prices, grain sorghum requires less water than corn.
“Even though rice prices are likely to be higher in 2007 than they were last year, most observers expect a reduction in Arkansas’ rice acreage this year, said Carl Frein, a rice broker with Farmer’s Marketing Service in Brinkley.
“‘I think we’re going to lose probably 5 [percent ] to 10 percent of our rice acreage compared with last year,’ Frein said.”
Meanwhile, Doug Smith began an article published in yesterday’s Minneapolis Star-Tribune this way: “Concerned. Dismayed. Upset.
“Those were the reactions last week from conservation groups to potentially drastic changes to the federal Conservation Reserve Program (CRP) — touted as the most successful wildlife conservation program in history. Under the program, more than 36 million acres of cropland has been idled and replaced with grasslands, which have improved water quality and provided prime wildlife habitat.
“But now the future of CRP is in doubt.
“Here’s what happened: U.S. Agriculture Secretary Mike Johanns announced that his agency would offer no new CRP enrollments in 2007 or 2008. Enrollment is expected to drop by at least 3 million acres this year.
“And Johanns said the Bush administration might allow farmers to cancel some existing CRP contracts to plant corn for ethanol production, meaning a potential loss of many more acres.”
The article noted that, “Pheasants Forever issued a statement last week calling the actions ‘unacceptable’ and urging members to write to Johanns and their Congressional representatives opposing the plans.
“To read Pheasants Forever’s statement, see www.pheasantsforever.org.”
Pheasants Forever was also the focus of the latest DTN Farm Bill Lobbyists series.
The DTN article, which was posted on Friday at DTNAG.com, stated that, “Pheasant hunters have friends in Washington and that means the Conservation Reserve Program has friends as well.
“Many of the fears sportsmen have of ethanol prompting farmers to return to the days of fence-row-to-fence-row planting were allayed when the two chairmen of the congressional agriculture committees not only held a forum at the Pheasants Forever convention, but also took in dinner, lunch and toured the expo hall admiring the shotguns, hunting gear and array of material about the CRP.
“Though ethanol has become the giant agricultural headwind, Sen. Tom Harkin, D-Iowa, and Rep. Collin Peterson, D-Minn., have been long-time advocates for conservation. Peterson said he remembers the damage caused to his childhood hunting areas by overproduction.
“‘It’s great to have leadership with conservation as a top priority,’ said Dave Nomsen, director of government affairs for Pheasants Forever. ‘It doesn’t hurt that these guys, Harkin and Peterson, both hunt.’”
The article noted that, “Nomsen said he is ‘cautious’ about Secretary of Agriculture Mike Johanns’ plan that would prioritize future whole-field enrollments in CRP for land that grows biofuel crops.
“The challenge will be to promote such fuels that can offer benefits to outdoorsmen such as good nesting and brooding habitats. ‘To do that, I want to make sure we investigate mixes of grasses and grasses together that would provide much better nesting and cover for wildlife, especially for pheasants, but can also provide sustainable biofuels,’ Nomsen said. ‘It’s an intriguing area.’”