I. Doha – France
II. Farm Bill Issues
I. Doha – France
Reuters news reported earlier this week that, “European Union industry ministers on Monday urged key partners in the stalled Doha trade talks to explore ways to conclude the negotiations successfully, though France vetoed setting a 2007 target for such an outcome.
“The ministers agreed the possibilities for a ‘constructive compromise’ should be explored and called on key partners to ‘act in the same spirit of constructive commitment in order to conclude the negotiations in a successful way,’ EU sources said.”
Late last week, French President Jacques Chirac spoke out with very sharp words regarding U.S. farm subsidies and spoke specifically against federal cotton subsidies, which he identified as “scandalous” and “immoral.”
The article added that, “France, however, rejected adding ‘as soon as possible in 2007’ to the conclusions of Monday’s meeting, EU sources said.”
The Reuter’s piece also reminded readers that, “France, the staunchest defender of EU farm subsidies, has repeatedly warned [EU Trade Commissioner Peter Mandelson] against going too far in the negotiations.”
Reuters writer Anna Willard reported yesterday that, “Alain le Potier gazes across the wooded valley from his hilltop family farm in Brittany but, like many French farmers, his view is clouded by worries about the April-May presidential election.
“The rolling hills in this part of northwest France are dotted with small farms like his, symbols of a rural way of life that is entwined with a culture of gastronomy and guardianship of the countryside which President Jacques Chirac holds dear and has fought to defend.
“As Chirac’s term nears its end, the two leading French presidential candidates, Socialist Segolene Royal and conservative Nicolas Sarkozy, have barely mentioned agricultural policy in their campaigns.”
The article added that, “France is the largest beneficiary of the EU’s farm subsidies, which make up more than 40 percent of the overall EU budget, and Chirac has vigorously defended French interests against growing pressure to cut spending.
“Le Potier and other farmers worry that when Chirac leaves office as expected after the presidential election, their way of life will be on the line.”
Ms. Willard also pointed out that, “Attitudes toward agriculture are starting to change.
“Germany and Britain are pushing for reform of the EU’s Common Agricultural Policy (CAP) and the next French president will have the job of negotiating the EU budget.
“He or she will also be responsible for making the French voice heard in world trade talks.
“As farms have grown bigger and technology has advanced, the number of farm workers has fallen from 2 million in 1970 to 881,000 in 2005, reducing their political clout.
“Other sectors of the economy such as services or aircraft production have also become important employers, rivalling the attention given to the rural economy.
“‘Given that the agricultural electorate is quite small today, politicians don’t really need to get stuck into the problems of farming,’ said farmer Pascal Le Floch.”
Late last week, French President Jacques Chirac spoke out with very sharp words regarding U.S. farm subsidies and spoke specifically against federal cotton subsidies, which he identified as “scandalous” and “immoral.” For additional details on this issue, see “Focus on Africa,” which was posted on Monday at the German Marshall Fund’s Trade & Development webpage.
European Trade Commissioner Peter Mandelson authored a letter to the editor, which was published in today’s Wall Street Journal, where he noted that, “Richard Holbrooke and Stuart Eizenstat (‘Trade for Aid,’ editorial feature, Feb. 16) are absolutely right that Africa needs a successful conclusion to the Doha Round. But steep EU farm tariff cuts both ways for developing countries depending on their level of competitiveness. EU farm tariff cuts will do little for most in the developing world for the simple reason that almost all of their agricultural produce already enters the EU tariff-free. The EU has already almost fully implemented the 100% duty-free/quota-free market access for all exports from Least Developed Countries that we agreed back in 2001 — others in the developed world have yet to match this.
“The level of farm tariff cuts initially demanded by the U.S. was unsustainable both for the EU and for developing countries. They would have wiped out the tariff preferences on which, for better or worse, African countries still depend for agricultural export access in the face of the world’s competitive farm exporters. The EU has agreed to come as close as possible to the level of tariff cuts demanded by developing countries. The real competitive gain for African farmers in the Doha Round will come from cutting trade-distorting farm subsidies and export subsidies for farm goods — both of which allow farmers in the rich world to undercut farmers in developing countries. The EU has already offered to slash trade distorting farm subsidies by 70% and eliminate export subsides altogether if others do the same. Combined with the tariff cuts we are offering, this reform adds up to the biggest liberalization of farm trade in history.”
Meanwhile, U.S. Secretary of Agriculture Mike Johanns spoke yesterday to The Agribusiness Roundtable of Washington in Washington D.C.
At the conclusion of his remarks, Secretary Johanns took a question from a member of the audience. Although the text of the question was not available on the transcript, here is how Sec. Johanns replied, “Tucki asked me the question, Can I handicap what the potential is for a Doha Agreement coming together and how that would fit together with the Farm Bill that we have proposed. Boy. It’s hard to handicap where Doha is at. I guess I would offer this. I’m probably more optimistic about Doha than I’ve been since the talks were suspended in July. When they were suspended in July of last year, there was every potential that we just simply would not get back to the talks for potentially years. That has not happened. The world community has strongly expressed its preference for a successful Doha Round. The talks continue at a technical level, and now we have a signal from [W.T.O. Director General Pascal Lamy] that he wants to pull the countries together to see if we can move this forward.
“So I’m more optimistic today than I’ve been in some time.
“Now in terms of the interface with the Farm Bill, here’s what I would say. It was really our intent to draft farm bill proposals that made good sense for agriculture. We certainly were very mindful about the trade implications. I spoke to Farm Bureau convention recently, and I said, you know there’s probably times where you want to tell the WTO to take a hike. And you know what? Some people applauded that!
“The reality though is that you can’t. We work in an international marketplace in agriculture; 80 percent of our cotton goes into the export market, 50 percent of our rice, about a third of our row crops being impacted admittedly, some by ethanol. You just can’t ignore the fact that this is a very important market for us.
“And if you look at all the statistics, the growth is there. So we can’t ignore that. But we try to craft proposals that just made good sense, proposals that were not market-distorting, that allowed a farmer to say, ‘You know what? I am going to grow this crop this year because it makes good market sense to grow this crop this year.’ It’s not a situation where a farmer would look and say, ‘You know I’m going to grow this crop this year because it makes good sense from the program standpoint.’
“And so if you look at our proposals, they are market-based. They really do look at what I would regard as just good sound farm policy, and I think in the end they will work better in the international arena. I think that’s an extra benefit of what we’re doing. In fact, I would suggest that they will work better, and I think that’s important for farmers.”
II. Farm Bill Issues
Peter Shinn of Brownfield reported yesterday that, “National Corn Growers Association First Vice President Ron Litterer met Tuesday with U.S. Ag Secretary Mike Johanns. Beforehand, Litterer told Brownfield the 2007 farm bill and ensuring sufficient corn acres are planted this spring were both on the agenda.
“On the subject of the farm bill, Litterer said NCGA wants a proposal that blends the commodity title and crop insurance to provide a revenue-based safety net. If designed properly, Litterer said such a program could eliminate the need for ad hoc disaster aid.
“‘What it really comes down to is that we have to look at all the mechanisms that kick in to provide a safety net for farmers,’ Litterer said.
“Litterer conceded a revenue-based safety net wouldn’t be less expensive than the current farm bill in years of crop failures. But he said he also believed, since bad years would ideally be infrequent, the average cost of the program over the life of the 2007 farm bill would actually be much less than suggested by worst-case scenarios.
“‘Yes, you can, I think, make that argument,’ said Litterer.”
A Dow Jones news article posted yesterday at the DTN Ethanol Center webpage, reported that, “While some analysts believe the U.S. Agriculture Department may have been too conservative in its long-term projections for corn use and ethanol production, others say the government figures may not be far off the mark.
“Financial services and analytical firm Credit Suisse said the USDA was too ‘conservative’ in its baseline projections.
“‘By our math, the USDA is expecting corn to go towards 9.3 billion gallons of ethanol production by 2008-09. We believe it could get as high as 11.4 billion gallons based on capacity expansion projections by the Renewable Fuels Association,’ Credit Suisse said in research report issued last week.”
The Dow Jones article also noted that, “In addition, the USDA is being ‘overly conservative’ with its estimates on corn prices, which could trend ‘well above $4.00/bushel in the event of supply or export demand shocks,’ Credit Suisse said.
“The USDA projects on-farm corn prices at $3 a bushel in the 2006-07 crop year, rising to $3.75 a bushel by 2009-10.”
The article added that, “John Kleist, analyst at Top Third Marketing in Chicago, said the Credit Suisse projections seem to be a ‘best-case scenario.’
“‘We’ve got 10 million more (corn) acres coming in and if we’re going to put together an 11, 12 or 13-billion crop, ethanol’s not going to eat all of that,’ he said.
“‘If the USDA is wrong, as they say, then I think a lot of things have to come together perfectly,’ Kleist said.
“For example, if crude oil prices, which are currently trading near $58 a barrel, were to drop and remain near $40 and if corn futures were to rise to $5 a bushel, from a current level near $4, profit margins would narrow and the supply-and-demand situation for ethanol would likely change.
“‘They are looking at the industry optimistically, from the price of corn not being too high and the price of crude oil not being too low,’ Kleist said.”
Jerry Perkins reported in today’s Des Moines Register that, “The fast-growing ethanol industry will attract more private investment and public subsidies, the president of the Renewable Fuels Association said Tuesday at the National Ethanol Conference.
“‘2006 was a seminal year in the ethanol industry … notable as much for the growth in public awareness as for the phenomenal growth in production,’ Robert Dinneen told more than 2,000 people at the meeting.”
Mr. Perkins added that, “The Bush administration, governors, lawmakers and others have called for increased government support for ethanol, an indication that political support for ethanol and other renewable fuels remains strong, Dinneen said. Some agribusinesses and livestock producers worry that high-priced corn – caused by increasing ethanol production – will impact supplies of the crop for food and animal feed. However, Dinneen said, corn producers will increase their plantings and ever-improving seed genetics will lead to more corn to meet all needs.
“Keith Collins, the U.S. Department of Agriculture’s chief economist, has estimated that the ethanol-fueled increase in corn prices lowered federal payments to farmers by $6 billion last year. Dinneen said $2.7 billion from the ethanol industry in new federal tax revenues meant that taxpayers gained a return on their investment in government subsidies paid to ethanol producers.”
And with respect to acreage shifts and projected plantings this spring, an article posted yesterday at DTNAG.com reported that, “Corn may pull more acres away from cotton in the southern U.S. than previously estimated as corn demand and prices lure farmers from crops more commonly grown in that region.
“In early February, the National Cotton Council of America estimated planted cotton acreage would fall nearly 14 percent from last year to 13.2 million acres this spring, based on its annual planting survey.
“But ‘in general, there’s widespread talk that cotton will lose more acres than the all-cotton decrease from 2006 of 13.6 percent to 13.21 million acres foreseen earlier in the National Cotton Council survey,’ DTN Contributing Cotton Analyst Duane Howell said.
“The switch from cotton to corn is not expected to put a pinch on the U.S. cotton supply, which presently has a carryover of nearly 2 million bales.”
Also posted yesterday at DTNAG.com, another article in the DTN series on Farm Bill Lobbyists.
Yesterday’s DTN article stated that, “For American Farmland Trust President Ralph Grossi, the 2007 farm bill is not turning out as expected.
“Grossi convinced his board of directors to allow him to broaden the group’s agenda from saving farmland from residential and commercial development to making broader farm policy fairer and more conservation-oriented. He planned to do that by encouraging Congress to shift money from commodity subsidies to other programs, but with commodity prices high, congressional budget officers have not allocated much money for commodity programs. This seventh installment of our series on farm bill lobbyists looks at how Grossi is leading a fight to convince Congress to provide new money for the agriculture budget.”
After a more focused look at Mr. Grossi’s background and how the American Farmland Trust has helped shape the 2007 Farm Bill debate, the DTN article concluded by saying, “Grossi said at a news conference in May that farm program benefits should be broadly distributed, particularly to specialty crop and livestock producers, and that he believed the next farm bill would end the prohibition on planting fruits and vegetables on land that receives subsidies. Since this proposal would mean lower subsidies for rice and cotton growers over the long term, policymakers should consider a buyout for those growers, he said.
“But as the farm bill debate approaches, the problem Grossi faces is that there is no big commodity budget from which to get money. At the same time, Congress seems more inclined to spend money to develop renewable fuels than conservation programs.
“At a recent news conference, Grossi said the farm bill baseline is ‘evaporating’ and groups that want the farm bill to change will have to persuade budget writers to authorize it. ‘It’s the bleakest budget picture in memory at a time when U.S. agriculture is looking for a better safety net that helps farmers expand conservation on working lands and provides for new market opportunities,’ Grossi said.
“Grossi is encouraging the members of all the groups and causes that want Congress to put more money into conservation, nutrition, rural development and other forms of assistance to call and write their members of Congress to urge budget leaders to put in more money for these programs. Until the federal budget debate is finished this year, it seems almost impossible for Grossi and his allies to focus on the causes they have spent so much time organizing for the past several years.”