FarmPolicy

December 6, 2019

Economic Research Service Releases 2007 Farm Sector Income Forecast

Dow Jones writer Bill Tomson reported yesterday that, “U.S. farm net income will reach a record level of $87.1 billion in 2007, a substantial $28.1 billion increase from 2006, the U.S. Department of Agriculture predicted Thursday.

“Quick growth of corn-based ethanol production in the U.S. is a major component of rising net income, according to the new forecast, which also factors in government subsidies. The report was released by the USDA’s Economic Research Service.

“‘The rise in prices of grains and oilseeds due to the demand from the rapid expansion of ethanol production could result in a record corn crop and record cash receipts for crops,’ the report said.”

And Bloomberg news reported this morning that, “U.S. net farm income in 2007 will be 48 percent greater than a year earlier, and more than forecast in February, as higher grain and livestock prices offset increased production costs, the government said.”

The article indicated that, “Cash expenses will rise 8.5 percent to a record $222.6 billion, and gross cash sales will jump 16 percent to a record $276.4 billion, the USDA said.

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Biofuels Support, Commodity Subsidies & Trade- Interesting Interaction

Chris Clayton, writing yesterday at the DTN Ag Policy Blog, reported that, “The top congressman on agriculture issues suggested Wednesday that the Bush administration is willing to cut commodity programs as much as 80 percent from current levels to get a global trade deal.

“Criticism of the White House strategy on trade negotiations was a focus at a forum with Democratic North Dakota Sen. Kent Conrad and House Agriculture Committee Chairman Collin Peterson, D-Minn.

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Sen. Conrad: Farm Bill “At a Critical Moment”

Categories: Ethanol /Farm Bill

Bloomberg writers Heloiza Canassa and Romina Nicaretta reported yesterday that, “Cargill Inc., the largest U.S. agricultural company, said Brazil faces a glut of ethanol in two years as supply grows faster than domestic demand…An increase in ethanol exports to the U.S. would reduce the risk of oversupply, said Sergio Rial, the company’s Latin America director. The U.S. currently imports only 3 percent of its ethanol consumption, he said during an interview in Sao Paulo today.”

I. Farm Bill- Production / Prices
II. Ethanol

I. Farm Bill- Production / Prices

DTN writer Chris Clayton reported yesterday (link requires subscription) that, “U.S. senators working on the farm bill are grappling with ways to craft a revenue assurance plan that would work on a local level, but the cost of such an income-based counter-cyclical program is a problem.

“The farm bill is ‘at a critical moment,’ Sen. Kent Conrad, D-N.D., told farmers at a forum Tuesday with House Agriculture Committee Chairman Collin Peterson, D-Minn., at a farm outside Hillsboro, N.D. Senators are negotiating over a lot of concepts and trying to determine how they would work in practice, he said.

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Planting Flexibility- Base Acre Restrictions

Categories: Farm Bill

A recent Congressional Research Service report noted that, “In 2005, a World Trade Organization (WTO) challenge to U.S. farm commodity programs raised questions concerning the use of the planting flexibility restriction under existing trade commitments. Discussion on whether to extend the restriction in the next farm bill thus will have an important trade policy aspect as well as domestic market considerations.”

I. Base Acre Issues
II. Crop Insurance

I. Base Acre Issues

Philip Brasher, writing in Sunday’s Des Moines Register, reported that, “Farmers who grow federally subsidized crops such as field corn, soybeans, wheat and cotton can’t convert land to fruit or vegetable production, even for only one year, unless they permanently give up their right to collect federal payments on that acreage.

“[Iowa farmer Gary Boysen] was willing to do that on land that he owns. But to expand his fruit-and-vegetable acreage he needs to rent land, and that would mean persuading a landlord to take the acreage out of the federal farm program. That isn’t likely to happen.

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Farm Subsidies: Potential WTO Litigation

An article posted on Friday at The Copenhagen Post Online reported that, “Golden fields of rapeseed are becoming an even more common sight in Denmark these days as more and more farmers are finding out just how profitable the plant can be, reported financial daily Børsen…Recent figures from Statistics Denmark show that areas used for growing rapeseed have increased by 54,000 hectares already this year – a full 44 percent more than in 2006. This year has seen such an increase in rapeseed production that the plant now covers nearly 1.8 million hectares and trails only spring barley and winter wheat in terms of growing area.”

I. Farm Bill Issues
II. Biofuels
III. China

I. Farm Bill Issues

On Friday, the “Washington Insider” section of DTN indicated (link requires subscription) that, “News reports from Mexico say that Mexican rice farmers have retained a Washington, D.C., law firm to give legal advice as they work to convince their government to file an unfair trade suit against the United States. Mexico’s National Union of Rice Producers is calling on its government to bring the case to the World Trade Organization for what the growers call the ‘excessive subsidies’ that the United States pays to its farmers. (Graph from The Wall Street Journal Online.)

“Not so long ago, the shoe was on the other foot when U.S. rice growers won a WTO case against their Mexican counterparts.” [Related press release can be viewed here]. “Some industry observers believe the current agitation may represent nothing more than a desire to get even. However, others see a pattern developing with regard to WTO challenges to U.S. farm subsidies. Brazil earlier won a case against U.S. cotton subsidies and has been considering filing a similar action against U.S. soybeans. And Canada has begun a case against U.S. corn subsidies.

“So, one by one, U.S. farm subsidies either are or soon may be coming under attack, just as Congress gets down to the final phases of writing the next farm bill,” the DTN item said.

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Harkin: Title I Farm Bill Draft

On Wednesday, the Associated Press reported that, “Foreign ministers from 22 Latin American and East Asian countries were meeting Wednesday in Brazil to discuss ways of boosting ties between the regions and jump-starting stalled World Trade Organization negotiations…Latin America and Asia ‘are ample and diverse regions that need to know each other better,’ Brazilian Foreign Minister Celso Amorim said at the start of the two-day meeting in the capital of Brasilia. ‘Geographical distance is not an obstacle, this excuse is not valid anymore.’”

I. Farm Bill
II. Doha / Biofuels WTO Disputes
III. U.S. Ag Exports, China’s Currency

I. Farm Bill

DTN writer Chris Clayton reported yesterday (link requires subscription) that, “A draft proposal for commodity programs circulated by Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, would create a supplemental crop-insurance program in lieu of continued ad-hoc disaster programs.

“The plan would also shift the counter-cyclical programs to a national per-acre revenue target price. Marketing loan rates would also be adjusted based on average annual prices over the past five years.

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Brazil Ponders WTO Dispute

Categories: Brazil /Ethanol

The Associated Press reported yesterday that, “Brazil, which already has won a series of trade rulings over U.S. cotton subsidies, expressed dissatisfaction with Washington on Wednesday at the conclusion of talks aimed at avoiding a new WTO dispute between the two countries.

“But Flavio Marega, head of the Brazilian Foreign Ministry’s dispute division, said it was still too early to say whether his country would ask the World Trade Organization to launch a formal investigation into whether total U.S. payments to farmers have exceeded WTO limits.”

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Grassley Floats Farm Bill Funding Idea

Categories: Ethanol /Farm Bill

Doug Cameron, writing today at the Financial Times Online, reported that, “Cargill, the agribusiness group, has called for any new US renewable fuel mandate to have an ‘escape mechanism’ to prevent soaring demand for crops from distorting food supplies…The US group has been the most outspoken industry advocate of the need for policymakers to intervene in the emerging food-versus-fuel debate when heavily tax-incentivised investment in biofuels has pushed up global food prices.”

I. Farm Bill
II. Commodity Prices – Biofuels

I. Farm Bill

Reuters writer Christopher Doering reported yesterday that, “The Senate should establish a trust fund for conservation in order to allow the farm bill to devote more funding to other programs, Iowa Sen. Charles Grassley said on Tuesday.

“‘If we can help out by some philosophically sound idea of taking money and setting up a trust fund for conservation purposes, it might accomplish some of the same goals that we would in the farm bill,’ Grassley, the top Republican on the Senate Finance Committee, told reporters.

“‘Then money that would otherwise been spent on conservation in the farm bill could be spent on some other programs,’ he said.”

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Ag Production- Biofuels

Categories: Doha / Trade /Ethanol

Mark Gongloff noted on Friday at The Wall Street Journal’s Energy Roundup Blog that, “A larger-than-expected U.S. corn production estimate in August from the U.S. Department of Agriculture is not expected to improve ethanol profit margins this fall, analysts said…The larger corn production estimate on the surface should lead to higher to ethanol refining margins, but other fundamental factors probably will limit any increase in those margins, said Dave Wilson, energy analyst at Morgan Stanley.”

I. Ag Production- Biofuels
II. Trade Agreements

I. Ag Production- Biofuels

Iowa State University Agricultural Economist Robert Wisner, writing in the latest edition of the Iowa Farm Outlook, noted that, “USDA’s first field-based forecasts of 2007 crops indicate corn supplies should be fully adequate to meet the rapidly expanding use of the crop in fuel ethanol production for the year ahead. Adequate corn supplies have been obtained at the expense of sharp reductions in acreage of soybeans, cotton, various minor crops, and a modest reduction from last year in non-durum spring wheat acreage. If final corn production is near the indications from USDA’s latest forecast, corn futures prices and the corn basis (difference between cash prices and futures) have moderate down-side risk this fall – possibly into the low $3 per bushel range at or just before harvest – provided harvesting weather is favorable and the crop comes out of the fields rapidly.”

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Farm Bill: Focus on Local Coverage

Categories: Doha / Trade /Farm Bill

The Associated Press reported on Friday that, “The World Trade Organization’s top official predicted Friday that poor nations will win satisfactory concessions from rich ones by the end of talks on a new global trade accord…’My sense is that … developing countries will at the end of the day get a large part of what they are asking for in this negotiation,’ WTO Director-General Pascal Lamy said at a question-answer session organized by Malaysia’s trade ministry.”

I. Farm Bill
II. Doha

I. Farm Bill

Brandy Nance, writing on Friday at The Emporia Gazette (Kansas), reported that, “The 2007 Farm Bill is becoming less about farmers and more about urban issues, a congressman told those attending the 21st annual Beef Fest this morning.

“Kansas First Congressional District Rep. Jerry Moran spoke about the bill at the Lyon County Fairgrounds to a large group of Beef Fest participants. The bill has successfully passed the House but hasn’t had much activity in the Senate yet, Moran said.

“He said the bill likely will come up this fall and, in the event it is not passed, the 2002 Farm Bill likely will be extended until an agreement on the 2007 Farm Bill is reached.”

The article added that, “During the question-and-answer session of Moran’s speech, one person asked whether it was likely that the president would veto the farm bill.

“‘I think the president wants to veto the Farm Bill,’ Moran said, adding that the president’s advisors have told him that he could score political points by vetoing the bill. ‘The president has more leverage than I want (him) to have. I think that threat is real.’”

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FAPRI Baseline Updated

Yesterday, the Food and Agricultural Policy Research Institute (FAPRI) issued a mid-year update to the 2007 FAPRI baseline prepared in January 2007. The baseline update, which can be downloaded here, reflects market developments and incorporates estimate information available in early August 2007.

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ABARE Report on EU CAP reforms- Green Box Issues

In news regarding the trade title of the Farm Bill, Celia W. Dugger, writing in today’s New York Times, reported that, “CARE, one of the world’s biggest charities, is walking away from some $45 million a year in federal financing, saying American food aid is not only plagued with inefficiencies, but also may hurt some of the very poor people it aims to help…CARE’s decision is focused on the practice of selling tons of often heavily subsidized American farm products in African countries that in some cases, it says, compete with the crops of struggling local farmers.”

I. Farm Bill
II. ABARE Report on CAP reforms

I. Farm Bill

Yesterday, The Des Moines Register editorial board stated that, “Growing crops to produce energy is transforming the economics of agriculture. Drafting of the 2007 farm bill should not only reflect the dramatic change under way, but also shape that change to benefit rural communities and the national good. This bill, at this time in history, offers an unprecedented opportunity to further agriculture’s role in meeting some of the nation’s energy needs and also boost farm incomes in the process.

“But the temptation to plant fence row to fence row to reap higher crop prices threatens to exacerbate soil erosion and worsen water quality. So this farm bill should provide greater incentives than ever for farmers to protect the nation’s rich soil.

“Unfortunately, the bill approved by the House last month is less aggressive than it should be in promoting development of energy from crops and other agricultural sources. And it took a step backward in promoting conservation on cropland. That leaves much of the heavy lifting in beefing up conservation funding to Iowa’s Tom Harkin, chairman of the Senate Agriculture Committee.”

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Harkin: CSP will be part of the 2007 farm bill, "or there won't be a bill."

Reuters writer Missy Ryan reported today that, “The collapse of global trade talks could thwart efforts by poor African countries to curtail cotton subsidies and capitalize on a higher world price for the crop, a global cotton organization said on Monday…Terry Townsend, executive director of the International Cotton Advisory Committee, which groups 44 cotton-producing countries, called the World Trade Organization’s talks, known as the Doha round, the ‘biggest single issue in (world) cotton markets today.’”

I. Farm Bill
II. Biofuels
III. Commodities – Prices, Storage
IV. Doha

I. Farm Bill

Jerry Perkins reported in yesterday’s Des Moines Register that, “U.S. Sen. Tom Harkin, D-Ia., said Monday at the Iowa State Fair that the Conservation Security Program will be part of the 2007 farm bill, ‘or there won’t be a bill.’

“The farm bill passed last month by the House of Representatives deleted funding for the program for the first four years of the five-year law.”

Mr. Perkins added that, “Harkin’s efforts to restore the Conservation Security Program in the 2007 farm bill picked up support last week from U.S. Agriculture Secretary Mike Johanns, who said Friday that he wants to see an expansion of the program.

“‘We’ve had pretty good discussions with Senator Harkin about the Conservation Security Program, and it seems to me he’s on the right track and agrees with what farmers want,’ Johanns said in an interview following the release Friday of the USDA crop production report.”

With respect to legislative timing in the Senate, the Register article indicated that, “Harkin said he hoped to have a farm bill through the Senate Agriculture Committee by the third week of September and onto the Senate floor by the end of September.”

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Chicago Tribune: “In Congress, the farm bill is really about just two things: politics and money.”

The Associated Press reported yesterday that, “Rich and poor nations are closing ranks on cuts in import tariffs and farm subsidies and agreement could revive stalled negotiations on a new treaty to further liberalize global commerce, a senior official at the World Trade Organization said Monday…Deputy Director General Harsha Vardhan Singh said he expects a substantive outcome when negotiators from WTO member nations meet in Geneva next month to revive the deadlocked trade talks.”

I. Farm Bill
II. Rural Issues
III. Biofuels
IV. Doha

I. Farm Bill

Stephen J. Hedges, writing in yesterday’s Chicago Tribune, reported that, “The 742 pages of the 2007 farm bill address everything from land conservation and food stamps to school snacks and foreign aid.

“But in Congress, the farm bill is really about just two things: politics and money.

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Sec. Johanns Comments on House Passed Farm Bill

Categories: EU /Farm Bill

Joellen Perry, writing in today’s Wall Street Journal, reported that, “The global rise in food prices is catching up with continental Europe, adding to mounting inflation worries and forcing changes to European Union agriculture policy…Rising global food demand, freakish weather and the trend to reroute crops for biofuels are pushing up food-commodity prices globally. Standard & Poor’s GSCI Excess Return Index, which measures the price movements of eight agriculture commodities — including wheat, sugar and corn — is up 10% in the past year.”

I. Farm Bill
II. CAP- EU Food Prices

I. Farm Bill

In local coverage of the 2007 Farm Bill debate, Kendall Owens, reported in Friday’s Times-Herald (Forrest City, Arkansas), that, Rep. Marion Berry (D-Arkansas), in a talk to a group of Arkansas farmers, stated that, “‘There’s still some work to do on farm credit, and we didn’t get everything we wanted, but I can say that this is the only bill that I’ve ever seen where the chairman of the committee called every stakeholder into his office and asked if there was anything that needed to be added to the bill before it went to before the House. No one asked for anything additional, but it was just that extra effort that was really appreciated. Nobody got everything they wanted, but everybody got something that they needed,’ he said. (Graph from the Wall Street Journal Online).

“Berry told the farmers that if the bill passes in the Senate, President Bush has threatened to veto.”

With respect to the veto issue, Secretary of Agriculture Mike Johanns, in a speech delivered on Thursday to the Tennessee Farm Bureau Federation, noted that, “So the [Farm Bill] process is moving along as we hoped it would. I will also tell you that my boss, the President of the United States, wants to sign a Farm Bill before the year is over. For me, success is not bringing a Farm Bill to him that we say, Mr. President, you can’t sign this, you need to veto it. That’s not success for me. For me, success is to walk in and say, we have a Farm Bill that you can be proud to sign, that we can put our signature on this, you can put your signature on it, Mr. President. That will be success for me.

“But we’ve got some work to do.”

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Johanns on Crop Production Estimates: “The stars are aligning well here.”

Categories: Ethanol

Yesterday, USDA’s National Agricultural Statistics Service (NASS) issued a press release, which stated that; “U.S. farmers are expected to produce the largest corn crop in history in 2007, according to the Crop Production report released today by [NASS]. Corn production is forecast at 13.1 billion bushels, 10.6 percent above the previous record of 11.8 billion bushels set in 2004.

“Based on conditions as of August 1, corn yields are expected to average 152.8 bushels per acre, up 3.7 bushels from last year. This would be second highest corn yield on record, behind the 160.4 bushels per acre produced in 2004. Growers are expected to harvest 85.4 million acres of corn for grain, the most since 1933 and 14.8 million more acres than last year.”

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