FarmPolicy

July 15, 2019

President Bush: “We'll show flexibility when it comes to making sure this round is as successful as possible”

Associated Press writer Nate Jenkins reported yesterday that, “Ethanol producers have friendly government policies to thank for the current boom in the corn-based alternative fuel and will need more help from Washington to keep from going belly up in a few years, says a new study…Without a federally mandated increase in ethanol consumption, small plants could stop being profitable by 2011 and be operating in the red in 2013, according to the study by David Peters, an agricultural economist at the University of Nebraska-Lincoln.”

I. Doha
II. Farm Bill
III. Biofuels
IV. Wheat- Acreage
V. EU Update

I. Doha

Tim Colebatch, writing today at The Age Online (Australia) reported that, “The Doha Round trade talks may have one foot in the grave but the other is trying to drag its way to the finish line.

“US President George Bush yesterday hinted at a shift in the US position, while the man in charge of the talks told APEC trade ministers he was optimistic that victory was near.

“World Trade Organisation director Pascal Lamy, who is in Sydney to urge leaders of the Asia-Pacific Economic Co-operation forum to dig deep and make the concessions needed to get the round completed, told ministers that negotiators were closer to agreement than people realised, and the round could be completed within months.”

Mr. Colebatch added that, “Australia’s Trade Minister, Warren Truss, said Mr Lamy had been ‘quite upbeat’ in his presentation to ministers of the 21 APEC countries.

“‘He says discussions in Geneva have begun well, and there is a view that the disagreements can be bridged,’ Mr Truss said. ‘The gaps are not quite as big as people might think.’

“In a media conference with Prime Minister John Howard, President Bush implied that the US was prepared to make a new offer on farm subsidies to meet criticisms that it wants others to cut tariffs and subsidies while shielding its own.”

The article then indicated that, “Mr Bush said he believed the APEC summit could lead to an advance in the Doha Round. ‘It’s a hard issue to get done, but I believe, with will and determination, we can get it done,’ he said.

“‘And, as I’ll say in the speech here Friday (to APEC business leaders), we’ll show flexibility when it comes to making sure this round is as successful as possible.’

“It was unclear whether this meant a shift in the official US position, which is to offer to cut its annual subsidy ceiling to $US22.5 billion ($A27.3 billion), well above its average spending of $US19 billion, or in its unofficial position, which is to offer a ceiling of $US17.5 billion. WTO members, including Australia, have rejected the offers.”

The full text of the comments made by President Bush can be viewed here; in a more full context, President Bush stated; “We are talking about trade here at the APEC summit that the Prime Minister is ably leading. I happen to believe trade is important. I think the free trade agreement between Australia and the United States has been beneficial to both our peoples. Trade is up. When trade is up it means commerce is up, goods and services are flowing more freely. It means people are more likely to make a living. And by the way, when you’re trading with somebody you want their economy to be good. And I congratulate you on having such a strong economy. That’s important for our trading partners to be wealthy enough to have something to trade. (Laughter.)

“And so the question is can we advance the Doha Round here at the APEC. And I believe we can. I want to thank you for your able leadership. It’s a hard issue to get done, but I believe, with will and determination, we can get it done. And as I’ll say in the speech here Friday, we’ll show flexibility when it comes to making sure this round is as successful as possible.”

Dow Jones News writer Enda Curran reported today that, “U.S. Trade Representative Susan Schwab said Thursday that she was pleased with comments by China President Hu Jintao on China’s commitment to the Doha round of global trade talks.

“‘I am pleased by comments by President Hu on china’s commitment and willingness to a successful Doha Round,’ she told reporters after taking part in bilateral discussions with China, which included President George W. Bush and Hu.”

However, with respect to “flexibility,” the article concluded by saying, “Asked if the U.S. would be willing to cut subsidies as part of the trade negotiations, she said: ‘we are prepared to do our share and expect others to match that flexibility.’”

And the Associated Press reported today that, “Asia-Pacific trade ministers Thursday endorsed stalled world trade talks as the their nations’ best hope of sustained economic growth.

“The Asia-Pacific Economic Cooperation ministerial forum released a joint statement calling on their 21 leaders to back a successful conclusion to the so-called Doha round of World Trade Organization negotiations on trade liberalization.”

II. Farm Bill

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, is likely to schedule committee consideration of a new farm bill the week of Sept. 17 and hopes that Senate Majority Leader Harry Reid, D-Nev., will schedule floor action on the bill shortly thereafter, a Harkin spokeswoman told DTN in an e-mail.

“The spokeswoman said that the committee would not be ready to consider the bill until the third week of September because senators just returned to Washington this week and will be in session next week for only three days because of a break for the Jewish holidays.

“The content of the Senate bill is still uncertain. Harkin has said he wants more money for conservation programs, especially the Conservation Security Program, as well as boosts in funds for food stamps and rural development programs. But Senator Kent Conrad, D-N.D., and Senator Saxby Chambliss, R-Ga., the highest ranking Republican on the committee, have said they are more concerned about maintaining current subsidy programs.”

Mr. Hagstrom also explained that, “The Senate farm bill debate could also be affected by trade negotiations if the United States offers to make deeper cuts in farm subsidies. President Bush and U.S. Trade Representative Susan Schwab are under pressure from other world leaders to offer deeper cuts in U.S. farm subsidies. Bush and other world leaders have said they would like to revive the Doha round talks, but many analysts say that there is little likelihood of serious movement in the talks until 2009.”

Meanwhile, Tom Steever reported yesterday at Brownfield that, “Iowa’s GOP Senator is ratcheting up pressure to have federal farm payment limits included in the farm bill. Charles Grassley says he and North Dakota Democratic Senator Byron Dorgan sent a letter warning Senate Agriculture Committee members that a lack of payment limit reforms will jeopardize support for a farm safety net, which Grassley says is badly needed.”

III. Biofuels

Associated Press writer Nate Jenkins reported yesterday that, “Ethanol producers have friendly government policies to thank for the current boom in the corn-based alternative fuel and will need more help from Washington to keep from going belly up in a few years, says a new study.

“Without a federally mandated increase in ethanol consumption, small plants could stop being profitable by 2011 and be operating in the red in 2013, according to the study by David Peters, an agricultural economist at the University of Nebraska-Lincoln.” (The study can be downloaded by clicking here).

“Large plants, meanwhile, could see profits cut in half in four years before losing millions of dollars in seven or eight years and being forced to rely on reserves to cover losses.

“The study comes as Congress tries to craft an energy bill that addresses alternative fuels.”

The AP article added that, “More government-driven demand could be particularly important for Corn Belt states such as Nebraska and Iowa where plants have sprouted quickly and are seen by politicians and others as a way of revitalizing struggling rural areas.

“But Peters said financial projections for a fuel whose demand ‘is entirely government driven’ show that plants shouldn’t be counted on as a reliable tool for rural resurgence.

“‘Don’t base decisions in your community on the aberration of 2005 and 2006,’ when there were record-high profits at ethanol plants, Peters said he tells small-town leaders. ‘I think that’s what the mind-set is, but there’s a new reality coming around and people haven’t gotten their heads around it.’

“He said he expects prices to drop to historically normal levels.

“‘It’s not going to be this revolutionary development for rural communities,’ Peters said.”

An item posted on Tuesday at the DTN Ethanol Blog noted that, “The Renewable Fuels Association, which represents the U.S. ethanol industry, spent $310,000 in the first half of 2007 to lobby the federal government, according to a disclosure form. The group lobbied on legislation that promoted biofuels made from corn and other agricultural products, the construction of dedicated ethanol pipelines, price gouging prevention and other issues. The group — whose members include Archer-Daniels-Midland Co., The Andersons Inc. and Pacific Ethanol Inc. — lobbied Congress, the Environmental Protection Agency and Agriculture and Energy departments.”

With respect to technological advancements in biofuels production, David A. Fahrenthold reported in today’s Washington Pot that, “Researchers across the country think that switchgrass could help supplant corn as a source for the fast-growing ethanol industry. In Virginia, some officials are trying to make the state the Iowa of the new cash crop. They’re urging farmers to grow it and envision dozens of refineries that will turn the stalks into fuel.

“‘It’s the future of the rural community and the world as you know it,’ said Ken Moss, an entrepreneur in south-central Virginia who is using some state funds for a factory that turns switchgrass into a substitute for heating oil.

“But such efforts have hit a snag: Scientists haven’t perfected the process that turns switchgrass into ethanol. So for today, the Crop That Could Change Virginia is just hay with better publicity.”

IV. Wheat- Acreage

Bloomberg writer Tony C. Dreibus reported yesterday that, “Wheat jumped to a record, rising the maximum amount permitted by the Chicago Board of Trade, on signs of increased demand for dwindling global supplies.

“Since yesterday, Iraq has purchased 200,000 metric tons of U.S. wheat, Egypt reported buying 300,000 tons and Taiwan bought 46,000 tons. Global supplies, already forecast to fall to the lowest in 26 years, may be further reduced by dry weather in Australia and Argentina, which begin harvesting their crops in October. Prices have doubled in the past year.”

The article stated that, “Wheat futures for December delivery rose the exchange’s one-day limit of 30 cents, or 3.7 percent, to a record $8.355 a bushel in Chicago. The price has rallied as global consumption exceeded production for the seventh time in eight years. Futures have risen 40 percent since the beginning of July.”

In related news, a Reuters news article from yesterday (via DTN, link requires subscription) reported that, “Farmers in the Northern Hemisphere will begin planting next year’s winter wheat crop in a few weeks, sowing what could be seeds of relief for the market. As an old grain market adage goes, the cure for high prices is high prices.

“The spread, or price difference, between current ‘old-crop’ and 2008 ‘new-crop’ deliveries for the world benchmark, Chicago Board of Trade wheat futures, tells the story.

“As of Wednesday, CBOT new-crop wheat for delivery in July 2008 closed at $6.26-1/4 per bushel, a discount of more than $2 to old-crop December wheat, which closed up its daily limit at a contract high of $8.35-1/2.”

The article added that, “The big discount for new-crop July 2008 signals that the market expects an influx of supplies, despite worries about dry weather affecting wheat in Argentina and Australia, where harvest will start later this fall.”

Later, the article indicated that, “Given the boom in biofuels, which is prompting farmers to plant more corn and soybeans, some analysts questioned whether U.S. farmers would plant enough wheat. More than half U.S. wheat is planted in the autumn, goes dormant, and then is harvested the next summer.

“‘You don’t make up 30 million tonnes by increasing Kansas acreage by 10 percent,’ ADM Investor Services analyst Steve Freed said of seedings in the top U.S. wheat state.

“However, the European Union is considering measures to increase acreage, including releasing land that farmers are normally required to set aside for conservation.”

For more on this EU development, see this FarmPolicy.com update from July.

V. EU Update

An update highlighting a variety of EU agricultural issues, including the Common Agricultural Policy, was posted yesterday at FarmPolicy.com.

Recall that all FarmPolicy.com updates are available and archived at www.FarmPolicy.com. If you ever have trouble with the Email updates, be sure to check the webpage– note too that a Site Feed is also available. The Site Feed provides the most reliable way to receive the updates.

Keith Good

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