FarmPolicy

August 24, 2019

Gutierrez: Other countries need to do more in response to U.S. offers in Doha talks

Chris Clayton, writing yesterday at the DTN Ag Policy Blog, reported that, “There is a lot of talk in Washington about the stalemate on the Senate Agriculture Committee and the chances that the Senate could just take the House farm bill directly to the Senate floor for debate…Sen. Kent Conrad, D-N.D., raised the possibility in late August at a forum in his home state. The Senate would take the House bill straight to the floor then hammer out certain issues either on the floor or in conference later.”

I. Doha- WTO
II. Farm Bill
III. Biofuels- Commodity Prices

I. Doha- WTO

Reuters writer Missy Ryan reported on Saturday that, “Negotiators are making slow progress in Doha round trade talks this month, but it’s too soon to know if they can cobble together an agreement, the top U.S. trade official said on Friday, putting much of the onus on emerging market nations to push the talks toward a conclusion.

“‘It really is too early to tell how it’s going to play out,’ U.S. Trade Representative Susan Schwab told Reuters in an interview. The central question, Schwab said, is whether ‘the handful of naysayers’ will be ‘determined to kill the Doha round’ by rejecting proposals on industrial trade.”

The article added that, “Some hope the talks this month on agriculture can leverage a draft text put forward in July by Crawford Falconer, who heads WTO agriculture negotiations.

“The Bush administration gives qualified support to Falconer’s plan, which includes specific ranges for some areas and only broad outlines for others, and a parallel proposal on industrial trade.

“But the White House also insists that the drafts ask too much of the United States in cutting farm subsidies without demanding enough from emerging powers like India and Brazil, the round’s developing world leaders, in reducing their own barriers.”

With respect to cotton, the Reuters article concluded by stating that, “The negotiator [Schwab] also said that she expected to table a counterproposal on cotton subsidies, an issue that has pitted poor African producers against the United States.

“Falconer’s paper includes an earlier proposal, supported by countries like Benin and Burkina Faso, that would reduce U.S. cotton subsidies by more than 80 percent, a bigger cut than other crops would see. That idea is deeply unpopular among U.S. cotton producers.

“‘In the case of cotton, there’s only one data point. There really needs to be some alternative scenarios,’ Schwab said. But that proposal will only come after the overall framework for reducing farm subsidies has emerged, she said.”

Reuters writer Patrick Markey reported this morning that, “Developing nations that want deeper cuts in U.S. farm subsidies must show more willingness to open their own markets if the Doha round of trade talks is to progress, a top U.S. trade official said.

“Other countries need to do more in response to U.S. offers, U.S. Secretary of Commerce Carlos Gutierrez told Reuters during a visit to Colombia on Saturday.”

The article noted that, “U.S. officials say Washington has already offered substantial farm subsidy cuts, and is prepared to do more if advanced developing countries like Brazil, India and Argentina agree to deeper tariffs on both farm and industrial goods.”

As the Doha negotiations continue, the “Washington Insider” section of DTN reported on Friday (link requires subscription) that, “Talk is continuing about a possible Mexican request for a dispute settlement procedure at the World Trade Organization aimed at the U.S. rice program. Earlier this summer, Mexican rice producers began a campaign to convince their government to bring the case, and it now appears that the campaign may be bringing about the desired result.

“Addressing a conference earlier this week sponsored by Oxfam America, trade attorney Bart Fisher said both the Mexican Agriculture Ministry and Economy Ministry appear interested in a rice case. However, unlike other WTO cases against U.S. farm subsidies, the Mexican suit is focused on the future, not the past. Fischer said Mexican rice growers are concerned about rice subsidies that could be included in the 2007 farm bill, an indication that the threat of litigation is intended largely to affect the writing of that legislation.

“Washington Insider believes it is unlikely that Senate Agriculture Committee members will change so much as one clause of their farm bill draft due to concerns about a Mexican WTO case against U.S. rice subsidies. By the same token, it also is unlikely that senators who want to bring about significant reforms in U.S. farm policies will fix on the rice program as a prime example of a program that needs repair.”

In other trade related news, Richard McGregor, writing yesterday at The Financial Times Online, reported that, “Beijing has rejected consignments of pork from the US and Canada because they contain a banned additive – in spite of a domestic shortage of China’s staple meat, which pushed inflation to a 10-year high in August.

“The body that polices food import standards said the 8.37 tons of frozen pork kidney and 24 tons of frozen pork chops were returned after the discovery of ractopamine residue.

“The knockback fits a pattern of Beijing retaliating against US rejections of, and complaints about, the quality and standards of a range of Chinese goods in recent months.”

II. Farm Bill

Chris Clayton, writing yesterday at the DTN Ag Policy Blog, reported that, “There is a lot of talk in Washington about the stalemate on the Senate Agriculture Committee and the chances that the Senate could just take the House farm bill directly to the Senate floor for debate.

“Sen. Kent Conrad, D-N.D., raised the possibility in late August at a forum in his home state. The Senate would take the House bill straight to the floor then hammer out certain issues either on the floor or in conference later.

“‘We may come to a situation where we pass a bill in the Senate then go to conference and work out the details there,’ Conrad said in the forum.”

Mr. Clayton indicated that, “Lobbyists meeting with Senate staffers are asking the question and there is more talk being generated about going directly to the floor. One lobbyist said Friday such talk is ‘all the rage at every meeting I go to.’

“Senate Majority Leader Harry Reid’s staff has suggested he is contemplating the idea. The understanding is that if Harkin wants floor time it will have to happen between Oct. 8 (Columbus Day) and Thanksgiving. To get that debate time, Reid wants Harkin to have that farm bill moved out of committee before Oct. 6. If the committee can’t get that done, it’s possible the House version of the farm bill could go directly to the floor for amendments.”

The DTN item also reminded readers that, “It has happened before. In 1995, then-House Agriculture Committee Chairman Pat Roberts, R-Kan., couldn’t get a bill out of committee. Enough Republicans joined Democrats to vote down ‘Freedom to Farm.’ Republican leaders, who wanted reform, had a farm bill attached to an omnibus budget reconciliation bill that passed the full House. Differences with the Senate bill were then worked out in conference.”

In a related article, Michael Doyle reported on Saturday at the Modesto Bee Online that, “California fruit and vegetable growers might see a big-bucks victory temporarily slip away if Congress stumbles over a farm bill this year.

“The House did its part, passing legislation in late July that dedicates record funding to specialty crops. The Senate, though, remains stalled, and repeated postponements raise questions about the bill’s future.

“‘The Senate presents huge obstacles,’ Dan Haley, a lobbyist for California fruit and vegetable growers, cautioned Friday. ‘I try to remain an eternal optimist, but right now it’s not looking good.’”

Mr. Doyle went on to report that; “The temporary solution now looming — to extend current farm policies for another year — would allow lawmakers to sort out problems later. Unfortunately for California farmers, an extension also would freeze in place policies that shortchange the fruit and vegetable industry.

“‘Specialty crops would be the big losers if that were the end result,’ said Haley, whose clients include California prune, strawberry and walnut producers.

“The loss probably wouldn’t be long term. Eventually, a farm bill will be passed, and specialty crop producers have Senate allies. More than 20 senators have signed on to a letter circulated by Sen. Debbie Stabenow, D-Mich., urging big increases in fruit and vegetable spending.

“‘It’s really to underscore the importance of specialty crops,’ Stabenow’s spokesman, Brad Carroll, said Friday.”

Meanwhile, Ana Radelat reported yesterday at The Shreveport Times Online that, “Millions have been spent on lobbying fees and campaign contributions in a fight over a half-cent per pound of sugar for Louisiana’s cane growers.

“And the expensive campaign over the nation’s sugar program is far from over as the Senate prepares to debate the farm bill.

“When the House of Representatives approved its farm bill this summer, sugar growers won a half-cent increase in the U.S. Agriculture Department’s price support loan rates.”

The article pointed out that, “Rep. Charles Boustany, R-Lafayette, a member of the House Agriculture Committee who fought to help sugar growers, called the House farm bill ‘an absolute victory.’

“The win was especially sweet since a powerful array of groups — ranging from candy makers like Hershey to the U.S. Chamber of Commerce — lobbied heavily for drastic reforms to the program. They wanted to replace the sugar loan program with a subsidy that could help keep the price low.

“The House also moved to blunt the impact of an expected flood of imported sugar from Mexico next year that will be allowed under provisions of the North American Free Trade Agreement. The House farm bill would divert those sugar imports to the production of ethanol, keeping it from depressing prices on the consumer market.”

Near the article’s conclusion, Ms. Radelat noted that, “Sugar users hope Sen. Dick Durbin, D-Ill., will help them change one of the most complicated farm programs in the nation. Durbin has said he wants to abolish the Agriculture Department sugar program.

“But Sens. Kent Conrad, D-N.D., and Norm Coleman, R-Minn., who sit on the Senate Agriculture Committee with Durbin and represent beet sugar growing areas, are expected to fight to protect the sugar program.

“Jack Roney, an analyst with American Sugar Alliance, said he’s confident sugar growers will benefit from the Senate farm bill and the final bill negotiated by the House and Senate.

“But the White House has threatened to veto the final bill if farm subsidies are too high. That would leave Louisiana’s sugar growers planting under current policy.”

And with respect to cotton, in an article published in yesterday’s Washington Post, Bloomberg news writers Shruti Date Singh and Marianne Stigset reported that, “Cotton, the least profitable crop for U.S. farmers, is poised for its biggest advance in four years on demand for T-shirts and blue jeans from China and India.

“Speculators from fund manager Jim Rogers to Barclays anticipate prices will rise, and the $1 billion Schroders Agriculture Fund expects cotton may more than double during the rally. Growers in the United States, the world’s biggest exporter of the fiber, may plant the smallest crop in two decades to produce higher-priced wheat, corn and soybeans.

“‘Cotton is one of the cheapest commodities around,’ said Roland Jansen, whose $129 million Mother Earth Resources fund in Lichtenstein gained 28 percent last year, more than double the returns of commodity indexes. Cotton may gain 66 percent to $1 a pound in 2008 from 60.30 cents now, Jansen said. The commodity’s last increase of that magnitude was from 2001 to 2003.”

The Bloomberg article added that, “The appeal of cotton has waned for U.S. farmers after wheat more than doubled in the past year to a record, corn jumped to a 10-year high in February and soybeans gained 65 percent. The commodity, dubbed ‘King Cotton’ because of its economic importance since before the Civil War in 1861, has appreciated only 13 percent in the past year and is the cheapest ever relative to wheat.

“World cotton output will fall 2.3 percent to 25.4 million tons in the year that started Aug. 1, which will lead to the largest annual deficit in five years, the International Cotton Advisory Committee, which represents 44 governments, forecast. Consumption will rise 2.7 percent to 27 million tons, the group predicted.

“Per-capita use of cotton in China rose 26 percent from 2000 to 2005 to 6.4 pounds, the ICAC estimated. In the United States, where demand grew 1 percent last year, consumption was about 38 pounds per capita, said Cotton Inc., an industry-funded trade group based in Cary, N.C.”

The article also included more details with respect to farm economics, noting that, “Frank Rogers, who farms 4,500 acres in Bennettsville, S.C., said he will cut his cotton planting by 18 percent next year and sow more corn, soybeans and wheat.

“The cost of fertilizers, herbicides, seeds and farm equipment runs to about $400 per acre for cotton, compared with $225 for corn, $170 for soybeans and $150 for wheat, Rogers said.

“‘We are being pushed into these crops,’ he said.

“In Georgia, the third-largest cotton-growing state, the fiber is the least-profitable row crop, according to a study by W. Donald Shurley, an economist at the University of Georgia. Cotton will earn $40 an acre, compared with $124 for corn, $72 for soybeans and $94 for a dual crop of wheat and soybeans, Shurley said.

III. Biofuels- Commodity Prices

Cecilia Kang, writing in Saturday’s Washington Post, reported that, “First it was corn. Now wheat is getting the blame.

“Earlier this year, corn began getting pricey because it was in high demand to make ethanol. That sent prices rising for other corn-dependent products, including milk and meat. Now wheat is costing more and more because of poor harvests and greater global demand, sending grocery bills still higher.

“The price of wheat futures reached a record $9 a bushel on the Chicago Board of Trade on Wednesday. And the higher food prices that have resulted from the increase — items like baguettes, rigatoni and cupcakes cost more — come at a time when consumers are already feeling strained by energy prices and mortgage debt.”

The Post article noted that, “The Bureau of Labor Statistics reported that food prices increased 4.2 percent in the 12 months ended in July. That compares with a rise of 2.2 percent in 2006. The consumer price index for food, which includes groceries and dining out, is forecast to increase 3.5 percent to 4.5 percent this year, according to the Agriculture Department;” and the article added that, “Although food makes up only about 13 percent of total household spending, higher food costs worry economists who say that for every extra dollar spent on groceries, a dollar less will be spent on discretionary items like clothes and entertainment — purchases that fuel overall economic growth. And at a time of uncertainty over the housing market, stock market and jobs, consumers are more acutely aware of such price increases, they say.”

In addition, the article stated that, “Ethanol, a fuel that can be derived from corn products, set some of the rising grocery prices in motion. Demand for ethanol caused a worldwide shortage of corn this year, sending prices for futures of the crop on the Chicago Board of Trade above $4 a bushel last June, compared with about $2.50 two years ago. As farmers scrambled to grow more corn, crops such as wheat and soybeans were replaced, reducing their supply, according to Michael Swanson, a Wells Fargo agricultural economist.

“Droughts and poor weather that hurt crops in Australia and the Midwestern United States pushed prices for the corn sharply higher as demand increased from importers in North Africa and Europe. The Agriculture Department said this week that it raised its projections for wheat exports.

“That has trickled down to the shopping basket, as prices in July for cereal and bakery goods increased 4.1 percent from a year before, compared with 1.8 percent the previous year.”

Meanwhile, Chris Giles and Javier Blas reported in today’s Financial Times that, “Europe’s food and drink manufacturers face the fastest increase in the cost of raw materials since at least 1998, according to research by NTC Economics;” and Jamil Anderlini noted in Friday’s FT that, “China’s central bank raised interest rates for the second time in less than a month yesterday in an attempt to rein in soaring food prices, excessive bank lending and bubbles in the property and stock markets.”

The FT article added that, “The rising consumer price index is being driven mostly by food staples such as pork and eggs but the world is watching closely to see whether inflation will spill over into other sectors, such as manufactured goods, in which China has helped slow the rate of price rises for a decade.”

The commodities boom is also attracting private sector investment resources into the agricultural sector.

Holly Watt writing yesterday at The Times Online reported that, “One of the world’s biggest fund managers is to launch a £100m hedge fund that will buy up farmland across Britain to profit from booming food prices.

“Blackrock, half-owned by Merrill Lynch, the investment bank, will launch the London-based fund next month as investors show an increasing appetite for the ‘soft commodities’ market.

“The price of wheat has doubled in the past year, with leading food producers warning that price increases will be passed on to consumers this autumn. Even the United Nations has warned it will struggle to afford the rising cost of feeding the world’s starving millions.

“The boom in wheat prices has attracted a new wave of agricultural speculators – including hedge funds and pension schemes.”

The article added that, “Nik Bienkowski, head of listings and research at ETF Securities, said: ‘You’ve got record low inventories. Wheat is the lowest it has been for 30 or 40 years. Alternative fuels – sugar, corn, wheat – are being used to make biofuels.

“‘China used to be an exporter and is now becoming a net importer. Whereas previously people would have been asking what are agricultural commodities, now we have £500m to £600m in our products.’”

Keith Good

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