FarmPolicy

August 21, 2017

Farm Bill, Commodity Issues, Doha

Farm Bill

Congressional Quarterly writer Catharine Richert reported on Friday that, “For many on Capitol Hill, this week is looking a lot like do-or-die for the farm bill.

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Acreage Anticipation- Part II

Recall that last month (February 22), a Dow Jones news article stated that, “U.S. 2008-09 corn planted area is estimated at 90 million acres and production is seen at 12.81 billion bushels, according to the U.S. Department of Agriculture, which released its grains and oilseeds outlook Friday at its annual Agricultural Outlook Forum.”

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Doha, Farm Bill & the CAP

Doha

Yesterday, President Bush and Prime Minister Kevin Rudd of Australia held a joint press appearance at the White House.

In his opening remarks, President Bush stated that, “We spent a great deal of time talking about the economies. One thing we spent time on is talking about the benefits of trade between our two nations, and the benefits of a world that trades freely and fairly. And the Prime Minister was asking me about my views on Doha. I said it’s possible to achieve a Doha round. He, too, believes we should work to achieve a Doha round. However, I informed him that it’s — we’re willing to make serious concessions on the agricultural front, but we expect other nations to open up their markets on manufacturing, as well as services. And to this end, Prime Minister Rudd — Kevin Rudd said that he would be more than willing to help. And that’s — very grateful.” (Audio clip, MP3-0:50).

And Prime Minister Rudd stated that, “As the President has just indicated, we also spoke about the Doha Round. My own view is that if ever the global economy needs a psychological injection of some confidence in the arm, it’s now, and that can be delivered by a positive outcome on Doha. Takes more than two to tango. Takes a lot of people to tango when it comes to the Doha Round — combination of ourselves and the Cannes Group, the United States, the Europeans, Brazil, India, others. But what we have agreed, again, as strong, long-term supporters of free trade around the world, as one of the best drivers of global economic growth, is to work very closely together in the months ahead to try and get a good, positive outcome for Doha — good for our economy, good for the American economy, good for the global economy.” (Audio clip, MP3-0:56).

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Implications of High Commodity Prices

Matt McKinney reported in yesterday’s Minneapolis Star-Tribune that, “Fortune smiled on rural Minnesota in 2007, as median farm income soared 73 percent in a year, to $105,000, on runaway demand for corn, milk, wheat and soybeans.

“A University of Minnesota survey of 2,600 farms concluded that it was the most profitable year for the state’s farmers since 1973.

“‘We’re in one of those golden ages of agriculture,’ said Dale Nordquist, associate director of the Center for Farm Financial Management at the university, which does the annual survey.”

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Wall Street Journal: “Farm Lobby Beats Back 
Assault On Subsidies”

Lauren Etter and Greg Hitt reported in today’s Wall Street Journal that, “With grain prices soaring, farm income at record highs and the federal budget deficit widening, the subsidies and handouts given to American farmers would seem vulnerable to a serious pruning.

“But it appears that farmers, at least so far, have succeeded in stopping the strongest effort in years to shrink the government safety net that doles out billions of dollars to them each year.

“‘At some point, you have to step back and ask, ‘Does this make sense for the American taxpayer?’’ says Rep. Ron Kind. The Democrat from Wisconsin sponsored a measure that would have slashed about $10 billion over five years in subsidies — and saw it get crushed on the House floor.”

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Acreage Anticipation

Dow Jones News writer Doug Cameron reported yesterday that, “U.S. farmers are expected to continue boosting investment this year, but a closely-watched government report next week and rising input costs are likely to impact spending patterns.

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EU Energy Policy and Biofuels

In a Congressional Research Service (CRS) report from earlier this year (“The European Union’s Energy Security Challenges”- Jan. 30, 2008), Paul Belkin stated that, “Recent increases in energy prices and a steady escalation in global energy demand — expected to rise by nearly 60% over the next 20 years — have led U.S. policy-makers to engage in a wide ranging debate over how best to address the country’s future energy requirements. Similarly, energy security has become a policy priority for the European Union (EU) and its 27 member states. The EU imports about 50% of its energy needs. Barring significant changes, the European Commission expects this figure to rise to 65% by 2030. About half of the EU’s natural gas imports and 30% of its imported oil come from Russia. Europe’s growing dependence on Russian energy, and long-term energy agreements between Russian firms and some European governments have fueled speculation that Moscow is using the ‘energy weapon’ to try to influence European foreign and economic policy.

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Farm Bill Audio Excerpts- Senate Floor Debate, Interviews & Summaries

The following is a chronological archive of selected audio segments from the 2007 Farm Bill debate. The clips include excerpts from Senate floor debate, as well audio interviews conducted by FarmPolicy.com.

Farm Bill Negotiations Moving Slowly (March 18, 2008)

To listen to an audio recap (MP3) of some of the recent Farm Bill developments, see this FarmPolicy.com audio podcast from March 18, 2008 (MP3- 8:18).

The FarmPolicy.com audio segment includes comments made by Secretary of Agriculture Schafer at today’s USDA press briefing, a clip from Senator Charles Grassley (R-Iowa) regarding funding made in a press conference today, and a short clip from Monday’s AgriTalk program which includes analysis from Mary Kay Thatcher of the American Farm Bureau Federation.

Farm Bill: Direct Payments and Funding (February 27, 2008)

On February 27, DTN writer Chris Clayton reported that, “Policymakers and groups that have sought to reshape farm policy are again calling on Congress to reconsider tax changes to fund the farm bill while also paying direct payments to producers during these times of soaring commodity prices.”

Mr. Clayton explained that, “Most farm groups have defended direct payments as a safety net that would be there if hard times return. Others have noted that the payments, which are not tied to actual production, are compliant with World Trade Organization rules. The American Farm Bureau backs keeping direct payments, and the National Association of Wheat Growers wanted an increase in direct payments because, in many cases, direct payments were the only safety net for wheat producers over the past farm bill.”

The February 27 DTN item noted that, “[U.S. Rep. Ron Kind D-Wisconsin] and cohort Rep. Jeff Flake, R-Ariz., have sent a 10-point plan to House Speaker Nancy Pelosi, D-Calif., and other congressmen proposing to rollback any potential changes in target prices or loan rates, as well as reduce direct payments and establish tighter criteria for farmers to receive commodity payments. Given the current commodity markets, the Kind-Flake proposal particularly targets direct payments, which pay $5.2 billion annually to producers and are not tied to market conditions.”

For more perspective, see this FarmPolicy.com audio podcast from February 27 (MP3- 6:00) which features audio clips from Rep. Kind, Rep. Flake, President of the Grocery Manufacturers Association and former U.S. Rep. Cal Dooley, and Ken Cook. The FarmPolicy.com audio podcast lasts six minutes and is available here (MP3).

Crop Insurance: Senate Floor Excerpts (December 13, 2007)

Debate and votes on amendments to the Farm Bill continued in earnest on the Senate floor today.

Of particular interest was an amendment by Sherrod Brown (D-Ohio) regarding crop insurance.

The Brown Amendment would have increased funding for some farm programs by making changes to some elements of the crop insurance program.

The amendment ultimately failed on a vote of 32-63; but nonetheless, crop insurance profits, which have been extremely high lately, remain an interesting issue.

This audio file (MP3- about 12 minutes) contains audio excerpts from the debate on the crop insurance amendment- Senators that are featured include Sherrod Brown, Claire McCaskill (D-Missouri), Pat Roberts (R-Kansas) and Charles Grassley (R-Iowa).

Grassley-Dorgan Amendment: Audio Excerpts (December 12, 2007)

The Grassley-Dorgan Amendment regarding payment limits was debated on the Senate floor today.

This audio podcast (MP3- about 13 minutes) includes excerpts from the debate.

Four Senators are highlighted, and speak in the following order: Charles Grassley (R-Iowa), Blanche Lincoln (D-Ark.), Mary Landrieu (D-Louisiana) and Byron Dorgan (D-ND).

To listen to the audio highlights, just click here (MP3- about 13 minutes).

Chairman Peterson on the Farm Bill (December 12, 2007)

On Monday, House Ag Committee Chairman Collin Peterson spoke in Washington, D.C. to the Farm Journal Forum.

Chairman Peterson addressed issues regarding the Farm Bill and took questions from the audience.

This audio file (MP3- approximately nine minutes), contains two extended excerpts from Chairman Peterson’s remarks on Monday- in the first, he highlights key factors that lead to the House passing a version of the Farm Bill last summer.

In the second excerpt, Chairman Peterson spoke more specifically about working out differences between the House Bill and eventual Senate version of the Farm Bill and noted that financing is a key concern.

To listen to Chairman Peterson’s remarks in the entirety, including the questions that followed the speech, just click here (MP3- about 40 minutes).

FRESH Act: Senate Floor Audio Excerpts (December 11, 2007)

Debate and votes on amendments to the Farm Bill took place on the Senate floor today- of particular interest was the so-called FRESH Amendment sponsored by Sens. Richard Lugar (R-Ind.) and Frank Lautenberg (D-N.J.).

This amendment represented a reform alternative to the Ag Committee passed version of the Farm Bill.

However, the FRESH amendment was ultimately defeated by a vote of 37-58.

Prior to the vote, Sen. Lugar made arguments on the floor for why the amendment should pass –he discussed farm payment distribution issues, as well as concerns regarding trade compliance.

Later, Sen. Kent Conrad (D-ND) offered counter-arguments to the FRESH act, and also highlighted farm payment distribution levels and focused on the USDA definition of a “farm.”

To listen to these audio experts from the Farm Bill debate today, just click here (MP3- about 15 minutes).

Farm Bill Amendment: Biofuels- Audio Excerpts from the Senate Farm Bill Debate (December 10, 2007)

Amendments to the Farm Bill continued to be offered on the Senate floor today- one of the more interesting amendments was submitted by Senator Pete Domenici (R-NM), the Ranking Member on the Energy & Natural Resources Committee.

The Domenici amendment relates to biofuels and is somewhat overlapping in nature with some provisions in related energy legislation.

Sen. Domenici explained the technical aspects of his amendment, as well as his rationale for bringing up in the Farm Bill debate on the Senate floor today.

Today’s podcast also includes comments from Sen. John Thune (R-SD), who noted the impact biofuels production has had on the market price of some program crops, and that price-triggered federal farm outlays have been reduced under the 2002 Farm Bill as a result.

To listen to today’s podcast, just click here (MP3- about nine minutes).

Payment Limits – Income Limits: Audio Excerpts from the Senate Floor (December 9, 2007)

On Friday, debate regarding the Farm Bill took place on the Senate floor.

Although no votes were taken on amendments, some amendments were nonetheless discussed.

In particular, Senator Amy Klobuchar (D-Minn.) and Senator Saxby Chambliss (R-Georgia) discussed issues associated with farm program payment limits and income limits regarding farm payments.

Details of Sen. Klobuchar’s amendment were also explained.

To listen to these excerpts from Friday, just click here (MP3- about 17 minutes).

A FarmPolicy.com Interview with U.S. Representative Adrian Smith (R-Neb.) (November 18, 2007)

On Friday afternoon (Nov. 16), I had the chance to speak with U.S. Representative Adrian Smith of Nebraska (R) about a variety of farm policy issues.

We discussed Farm Bill extension activity in the House, aspects of reform in the House version of the Farm Bill, WTO issues, biofuels, and the change in leadership at USDA.

Congressman Smith was one of just 13 freshman Republicans to be sworn into office in 2007. He now sits on the House Agriculture Committee, as well as the House Budget Committee.

Congressman Smith represents Nebraska’s Third Congressional District, one of the largest agricultural districts in the country. A district that spans some 65,000 square miles and two time zones, Nebraska’s third district is home to over 30,000 farmers and ranchers who oversee over 38 million acres of farmland.

In the U.S., the district ranks first in the value of sales of grains and oilseeds, second in total value of agricultural product sold, and first in cattle and calve inventory. In 2005, Nebraska’s third district was the largest recipient of federal farm subsidy payments.

To listen to our conversation, just click here (MP3- about nine minutes).

Sen. Harkin: “I see the heavy hand of the White House behind what’s going on here.” (November 17, 2007)

The cloture motion to limit debate on the Senate version of the 2007 Farm Bill failed yesterday on a vote of 55 to 42.

Four members of the GOP voted in favor of the motion, Sen. Coleman (Minn.), Sen. Thune (S.D.), Sen. Grassley (Iowa) and Sen. Smith (Ore).

In his comments prior to the vote, Ag Committee Chairman Tom Harkin (D-Iowa) stated on the floor of the Senate that he thought the procedural impasse on the 2007 Farm Bill was being orchestrated by the White House.

Specifically, Sen. Harkin stated that, “I see the heavy hand of the White House behind what’s going on here.”

For complete audio coverage of yesterday’s Senate activity on the cloture vote, just click here (MP3- about 11 minutes).

Chairman Harkin Explains the Importance of Friday’s Cloture Vote (November 15, 2007)

This morning on the Senate floor, Agriculture Committee Chairman Tom Harkin (D-Iowa) explained the importance of Friday morning’s Senate vote regarding cloture and the 2007 Farm Bill.

Recall that Majority Leader Harry Reid (D-Nev.) filed a cloture motion on Wednesday in an attempt to place a limit on the delay that has stymied progress on the 2007 Farm Bill over the past several days in the Senate.

To listen to Chairman Harkin’s explanation, just click here (MP3- about four minutes).

Dan Morgan Provides Perspective from the Senate Press Gallery (November 14, 2007)

On Wednesday afternoon I had the chance to speak with Dan Morgan about Senate progress on the 2007 Farm Bill. At the time of our conversation, Dan was monitoring Farm Bill activity from the Senate press gallery.

Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States.

To listen to Dan’s observations, just click here (MP3- about seven minutes).

Sen. Conrad On Today’s Washington Post Farm Bill Article (November 13, 2007)

Sen. Kent Conrad addressed his opinions regarding an article from today’s Washington Post that highlighted the Senate version of the 2007 Farm Bill.

The North Dakota Democrat, who is Chairman of the Budget Committee, took issue with the news item on the floor of the U.S. Senate today.

Sen. Conrad used the news article to springboard into a broad colloquy on a range of issues associated with the budget, the media, EU farm policy and U.S. farm policy.

To listen, just click here (MP3- about 12 minutes).

Senate Farm Bill Audio Excerpts From Tuesday: Working Towards an Agreement on Amendments (November 13, 2007)

A sense of frustration permeated the atmosphere on the floor of the U.S. Senate today as issues regarding the amendment process to the 2007 Farm Bill persisted.

At certain points in the day- an agreement between the two parties appeared to be elusive, ultimately however, some progress was made.

Today’s audio excerpts include clips from Majority Leader Reid (D-Nev.), Ag Committee Chairman Tom Harkin (D-Iowa), Minority Leader McConnell (R- Ky.) and Ranking Member Saxby Chambliss (R-Georgia).

To listen just click here (MP3, about nine minutes).

2007 Farm Bill: Senate Floor Audio Montage From Thursday (November 8, 2007)

Today’s Ag Policy Soup podcast includes a sampling of statements made today on the floor of the U.S. Senate regarding various aspects of the 2007 Farm Bill.

The clips start with Sen. Thune of South Dakota explaining why it is important to get the Farm Bill passed.

Also included are clips from Sen. Roberts of Kansas on Farm Bill timing, production agriculture and direct payments; Sen. Conrad from North Dakota on budget issues; and a separate clip from Sen. Chambliss of Georgia with Sen. Conrad in which they discuss Farm Bill expenditures.

To listen, just click here (MP3- about seven minutes).

Senate Farm Bill Audio Excerpts: “Filling the Amendment Tree” (November 7, 2007)

On Tuesday, as the 2007 Farm Bill debate got underway on the floor of the U.S. Senate, Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) discussed issues regarding relevant Amendments that would be considered in the debate process.

Differing views on this issue stymied progress on the Farm Bill.

To listen to an audio excerpt of part of the discussion from yesterday’s debate between Sens. Reid and McConnell, just click here (MP3- about seven minutes).

Farm Bill on the Senate Floor: Audio Excerpts (November 5, 2007)

The Senate started debating the 2007 Farm Bill today. I have included some audio excerpts from Agriculture Committee Chairman Tom Harkin (D-Iowa) and Senator Kent Conrad (D-ND).

The audio comments highlight the broad-based nature of the Farm Bill, note changes in Title I subsidy payments, and hit on conservation issues, as well as foreign food aid.

To listen, just click here (MP3- about five minutes).

Senate Floor Debate Starts Monday (November 4, 2007)

The Senate webpage indicates that the Floor Schedule for Monday includes a 3:00 p.m. time slot to begin consideration of H.R. 2419, the Farm bill.

As the full Senate sets to take up debate of the 2007 Farm Bill, a quick review of a couple of Committee highlights seemed appropriate.

To listen to an audio recap of two interesting issues that came up in the Senate Ag Committee Farm Bill debate, just click here (MP3- four minutes).

Johanns Outlines 2007 Farm Bill Proposals (January 31, 2007)

Today, U.S. Secretary of Agriculture Mike Johanns outlined the Bush administration’s proposals with respect to the 2007 Farm Bill.

I have included audio excerpts of the Secretary’s presentation focusing on farm subsidy payment limitations and commodity support proposals.

The audio file also includes analysis from Mary Kay Thatcher of the American Farm Bureau Federation and Scott Faber, the Farm Policy Campaign Director for Environmental Defense.

The audio presentation can be downloaded here and lasts about 10 minutes (MP3).

Washington Post Series “Harvesting Cash” (July 19, 2006)

Today I had the opportunity to speak with Washington Post reporter Dan Morgan.

We discussed “Harvesting Cash,” the ongoing Washington Post series on U.S. farm policy.

To listen to our conversation, just click here (MP3, 14 minutes)

Themes Impacting 07 Farm Bill Debate (June 3, 2006)

Yesterday I spoke with Andy Martin, a National Correspondent for the Chicago Tribune.

We discussed an article he co-authored, “Cycle of votes, insiders keeps money flowing,” which was published in Sunday’s (May 28) Chicago Tribune.

Our conversation focused on the broader themes of the Tribune article and the ongoing debate regarding the nature of U.S. farm policy.

To listen to our conversation, just click here (MP3, 15 minutes).

(Note: Andy Martin is now a reporter for The New York Times).

Farm Bill- Disaster Aid Slows Progress

Jerry Hagstrom reported today at AgWeek.com that, “The Democratic chairmen and the highest-ranking Republican members of the Senate and House Agriculture committees announced March 18 how they would divide up additional money in the new farm bill, but Senate Finance Committee Chairman Max Baucus, D-Mont, pronounced the package ‘dead on arrival’ because it does not contain enough money for the permanent farm disaster program that he wants to create in the bill.

“Senate Budget Committee Chairman Kent Conrad, D-N.D., another advocate of a disaster aid program, also said the numbers were ‘unacceptable.’”

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Commodity – Food Cost Issues Continue to Percolate

Categories: EU /Food Aid /Food Prices

Associated Press writer Katherine Corcoran reported on Thursday that, “If you’re seeing your grocery bill go up, you’re not alone.

“From subsistence farmers eating rice in Ecuador to gourmets feasting on escargot in France, consumers worldwide face rising food prices in what analysts call a perfect storm of conditions.

“Freak weather is a factor. But so are dramatic changes in the global economy, including higher oil prices, lower food reserves and growing consumer demand in China and India.”

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“Analysis From Brussels” –By Roger Waite – CAP Backgrounder

In conjunction with expanding FarmPolicy.com viewership, FarmPolicy will also be broadening the amount of information available to readers.

In addition to the daily news summaries, starting today, FarmPolicy.com will also be featuring a new farm policy analysis section, entitled, “Analysis from Brussels”- by Roger Waite.

On Saturday, March 1, 2008, The German Marshall Fund of the United States (GMF) announced that, Roger Waite, editor of the AGRA FACTS and AGRA FOCUS newsletters and long-time agriculture policy correspondent in Brussels, has joined GMF as a Journalism Fellow. Roger will provide insight and comment on issues relating to the EU’s Common Agriculture Policy, in particular in relation to the forthcoming “Health Check”.

Roger’s analysis at FarmPolicy.com will be posted on a semi-regular basis and will provide readers with additional information that will assist them in assessing and gauging the political dynamics of the farm policy debate in Brussels – much as Dan Morgan does on US policy issues from Washington.

Roger’s updates will be available exclusively at FarmPolicy.com (homepage, Email and RSS feed)

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The first installment of Roger’s “Analysis from Brussels” is available below.

CAP Backgrounder

By Roger Waite – Roger is editor of AGRA FACTS, the Brussels-based newsletter on EU agriculture policy, and a Journalism Fellow at the German Marshall Fund of the United States. “Analysis from Brussels” is posted exclusively at FarmPolicy.com.

The evolution of the C.A.P.
Europe’s Common Agricultural Policy (CAP) has changed considerably in recent years. Goodness knows this was overdue. But successive policy changes in 1992 (“Mac Sharry”), 1999 (“Agenda 2000”), and 2003/4 (“Mid-Term Review” also known as the “Fischler” reforms) have turned the policy around from an expensive, severely trade-distorting , inefficient system based on price support and surpluses dumped on the world market to a much more market-oriented and flexible system, which is considerably less trade-distorting. It remains expensive (in terms of the overall EU budget), but considerably less so than in the past, and a growing share of the funding is being dedicated to policy options which are perceived to be more acceptable to the taxpayer.

Why has it changed so much?
First of all the previous system was unsustainable. Set up in the 1950s and 1960s when Europe was still short of food, the policy worked brilliantly well in encouraging farmers to produce more and more. The only problem was that the politicians of the 1970s and 1980s did not have the foresight or political pressure to adjust the system when the surpluses started to grow. Instead, production control concepts were introduced such as set-aside and dairy quotas – and budgetary stabilisers in order to keep spending in check. Nevertheless, farmers’ production decisions continued to be dominated by what subsidies (direct or indirect) were available, rather than what the market wanted – in the knowledge that the EU would pick up the tab for any surplus production (through public buying up of surpluses and/or using export refunds).

Mac Sharry reform – the first big step

It was only when the GATT Uruguay Round (WTO) talks failed in Brussels in December 1990 that European politicians accepted that they could no longer put off the inevitable reforms. Irishman Ray MacSharry – the then Farm Commissioner – came forward with proposals, based on the US model, to reduce the support price but introduce direct payments for farmers as “compensation” for their potential loss in revenue. While arable payments were based on historical reference yields, the livestock payments were per animal. In terms of reform, this was the most important first step in changing the direction of the policy, and one could argue that the 1999 and 2003/4 reforms were mere extensions of this. The reform also set up “accompanying measures”, notably for agri-environment and early retirement schemes, which were the forerunners to today’s Rural Development policy.

The other major influence on the process of CAP reform was the political changes in Central and Eastern Europe which meant that 10 New Member States including countries such as Poland, Hungary and the Czech Republic joined the EU in May 2004, with Bulgaria and Romania following in 2007. The need to integrate these poorer countries meant that the CAP had to change further as the EU could simply not afford to subsidise these countries’ agriculture in the same way. Indeed, the EU could not afford for farmers in these New Member States to get into the bad habit of western European farmers of allowing subsidies to influence significantly their production decisions.

The Mid-Term Review – also known as the Fischler reforms
With EU Enlargement imminent, the 2003/4 reforms were the last chance to make certain key changes. It was agreed to “decouple” subsidies from production as much as possible – also in order to make EU subsidies more “Green Box” in WTO negotiating terms. But in order to reach agreement among 15 Member States (as it was then), it was agreed to continue some Member States to retain “partial coupling” for some products. For example, France and Spain have kept 25% “coupled” payments for arable crops. The political reason for retaining “coupled” payments is quite simply the fear that if payments are fully decoupled, farmers in marginal areas will reduce production to the absolute minimum. (In order to receive direct aid, a farmer is not obliged to produce, but is required to keep the land in “Good Agricultural & Environmental Condition”.)

One other change in 2003 was the introduction of “cross-compliance”, seen by Fischler as a new way of justifying CAP direct support. After all, was it acceptable to the European taxpayers in 2005 and beyond that farmers were still being “compensated” for cuts in the support price in 1993? The EU has a range of environmental, animal welfare and other rules that farmers were already obliged to meet, such as the Nitrates Directive. The concept of cross-compliance links the payment of direct aid to 18 existing pieces of legislation, giving Member States the right to reduce a farmer’s payment if he is found to be failing to meet these rules.

Single Farm Payment
The 2003 reform also established what is in effect a “national envelope” of farm subsidies for each Member State on the basis of all past direct payment subsidies it received, with Member States being given much more flexibility on how to allocate this predominantly decoupled aid under this new “Single Farm Payment”. National governments could decide whether to implement this Single Farm Payment on the basis of an individual farmers’ historic subsidy receipts or to move towards a simpler, flat-rate payment per hectare in each region, i.e. “historic” or “regional” model. Or a fixed combination of the two, i.e. a “static hybrid” model. Or allow a progressive combination which moves slowly from a historic base towards a hectarage payment, i.e. a “dynamic hybrid”.

By allowing this flexibility, Farm Commissioner Franz Fischler achieved a much greater reform than was expected. But, this flexibility over the amount of “coupled” support and the type of Single Farm Payment model, means that there is virtually no “common” element to the Single Farm Payment received in any 2 Member States. For the record, there are 19 different SFP “models” applied in the 15 “Old” Member States – because Belgium is split into 2 regions (Flanders & Wallonia), and the UK is split into 4 (England, Scotland, Wales and Northern Ireland).

SAPS and phasing in for the New Member States

To confuse matters more, the situation in the New Member States is different. In their terms of EU accession, it was agreed how much direct aid they would have received based on historic production – and respective national envelopes were calculated. Because they lacked a proper historical reference, however, these countries are not allowed to apply a “historic” model Single Farm Payment, i.e. only a regional model per hectare. In fact, in an attempt to reduce the bureaucracy they face – and to set a signal for the “Old” Member States – the Commission agreed that the NMS could apply the Single Area Payments Scheme (SAPS), whereby the NMS merely pays a flat-rate per hectare for all farmland, calculated by dividing the national envelope by the eligible area. Under this system, rules about cross-compliance and compulsory set-aside are not applicable.

The big political and budgetary decision about how to treat the New Member States was resolved by phasing in the system of direct aids starting at 25% of EU-15 levels (i.e. just the full national envelope), rising to 30% in Year 2, then 35%, 40%, 50, 60, 70, 80 90 and reaching 100% after 10 years (i.e. 2013 for most of the NMS and 2016 for Bulgaria & Romania). During this period, the concept of compulsory modulation [see below] does not apply to the New Member States.

Article 69 – targeted payments
One further option open to Member States – defined under Article 69 of the EU Regulation on the Single Farm Payment (1782/03) – is the possibility for national or regional governments to filter off up to 10% of the aid in a particular sector and use it for targeted “environmental or quality production” support in that same sector . For example, the Scottish government decided to siphon off 10% of the amounts previously dedicated to beef production to fund an additional “coupled” payment for beef producers in the Highlands to ensure that the decoupling of payment does not see a massive reduction in cattle numbers. This is done in the form of a “coupled” payment per beef bred calf (with a lower rate payable from the 11th calf onward).

The growing importance of Rural Development
All of this “traditional” direct aid is funded from what is known as the 1st Pillar of the CAP (which also covers export refunds & intervention spending, i.e. “Market” spending). Both “Agenda 2000” and “Fischler” reforms established and expanded a “2nd Pillar” for the CAP of measures relating to Rural Development. In broad terms this are now divided into 3 “Axes” – i) modernisation & improving competitiveness, ii) land management & the environment, and iii) diversification in rural areas. Each Member State is granted an envelope of funding and Member States have come forward with national or regional programmes for the 2007-2013 period on how to spend this money. One key political point is that these measures are co-funded, i.e. 50%-75% comes from the EU budget, with the remainder coming from the national/regional government.

In overall budgetary terms, many Finance Ministers seem to feel that there is greater justification for committing EU funds to RD measures than to direct payments – arguing that this is paying for the “public good” that farmers provide. (Others argue that the cross compliance link give the Single Farm Payment a link to “public good”.) Rather than suddenly cutting the Single Farm Payment to increase RD funding, however, the 2003 Fischler reform introduced the concept of “compulsory modulation” whereby all farmers had their Single Farm Payment amounts above €5000 reduced by 3%, then 4% and now 5% – with the money shifted across to the Rural Development budget envelope. (At least 80% of the funding transferred stays within the original Member State.) For the record, 75% of EU-15 recipients of the Single Farm Payment get less than €5000 a year – and are therefore unaffected by this measure.

By Roger Waite

Commodity Prices- Food Costs; EU CAP Transparency; Doha

Commodity Prices- Food Costs

Javier Blas, writing yesterday at the Financial Times Online, reported that, “Rice prices surged to a 34-year high yesterday as the Philippines awarded a tender for the staple at an average price of $708 a tonne, up almost 50 per cent from the price it paid in late January.

“The sharp rise reflects a market suffering from tightening supply after important producers India and Vietnam this month both imposed restrictions on rice exports. Supplies from Thailand are also low, traders said.

“The jump in rice prices would exacerbate rising inflation in Asia and risks triggering social unrest, analysts said. The Philippines, one of the world’s biggest rice importers, is particularly exposed.”

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Farm Policy Developments: U.S. and EU

Categories: Doha / Trade /EU /Farm Bill

U.S.- Farm Bill

DTN writer Chris Clayton reported yesterday that, “A framework agreement on how to divvy up $10 billion in extra funding for the farm bill may be ‘dead on arrival’ because it would drastically cut proposed funds to create a permanent disaster plan for farmers.

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Farm Bill, Food / Commodity Prices and Biofuels

Farm Bill

Jerry Hagstrom writing on Monday at AgWeek.com, reported that, “Congress left town March 14 for a two-week spring recess, but congressional leaders agreed to continue work on a bill that would add $10 billion over 10 years to a bill that already costs $597 billion. About 70 percent of the $597 billion would be spent on food stamps and other nutrition programs.

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“Analysis from Washington”- By Dan Morgan- Wheat

Wheat

By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.

The bakers of this country are hurting, and therein lies a warning about what may lie ahead for U.S. agriculture.

About 80 of them were in Washington last week, visiting congressional offices, the White House and U.S.D.A., and issuing a 3-point plan for alleviating the “current crisis” of high wheat prices and shortages.

The American Bakers Association favors slashing acreage in the Conservation Reserve Program to free more land for wheat production; waiving the just-enacted biofuel requirements if necessary to head off severe economic harm, and “giving priority to the needs of the domestic food industry” when U.S. wheat stocks drop too low.

Such a call for government intervention in the farm economy seems strangely anachronistic in today’s booming, globalized agriculture.

We’ve seen blips before. High commodity prices invariably cause a backlash from consumers, the livestock industry, advocates for the poor and importers overseas. They demand “action” from politicians to help ease prices and curb shortages. Farmers respond by increasing their crops. Soon enough the situation corrects itself and we’re back to low prices, surpluses and farmers saying, “We told you so.”

Yet what is occurring in the markets, and in American agriculture, feels different this time around. That’s why it’s important to take the bakers seriously.

Hundreds of millions of people in Asia are flooding into urban centers where they can be fed more easily by imports than by inefficient farmers in their own countries. Incomes are rising and people have the money to buy more bread, vegetable oils and meat, best supplied by global trade.

In the United States and Europe, stepped up requirements for the use of biofuels is another new factor that is building a higher floor under prices. (There was no such ethanol mandate when Congress wrote the last farm bill in 2002.)

Meanwhile, soaring oil prices are providing incentives for gasoline makers to blend cheaper domestic ethanol, quite aside from the biofuel mandates.

The result has been record commodity prices. Global stocks of edible oils – palm, rape, soy and sunflower – are at a 30-year low. Spring wheat prices topped $20 a bushel in the Minneapolis Grain Exchange. Some bakers fear the U.S. could soon run out of rye bread. U.S. supplies reportedly are tapped out, and millers are shopping in Europe for rye.

Come April and May, durum wheat growers in Arizona and California may be able to name their own price. There will be little or none left from the 2007 North American crop from which to make pasta flour.

The usual response to high prices and shortages is more production. In the early 1970s, Agriculture Secretary Earl Butz, exhorted farmers to plant “fencerow to fencerow” after Russian grain deals and severe drought sent prices soaring.

But there are limits now to what farmers can do. Yield increases have slowed, and in the case of wheat, they have lagged. Expanding acreage isn’t the obvious option it once was. Plowing idle land, or cutting forests to make way for row crops, releases vast amounts of carbon and could affect climate. As governments move toward tighter controls on carbon emissions, farming more acres may become problematic.

That’s what has begun to create pressures for a stronger government hand in agriculture after years of laissez-faire.

The recently passed energy bill took a significant step in that direction. The legislation set aggressive requirements for gasoline manufactures to blend biofuels. But it also gave EPA, in consultation with U.S.D.A. and the Energy Department, authority to waive the requirements if they would “severely harm the economy of a state, region or the U.S.” or if domestic supplies proved inadequate.

EPA presumably can’t act yet, because it is yet to write the rules for this new law. But Congress made clear it wants the government to balance biofuels needs against other interests. “Trading independence from foreign oil for dependence on foreign sources of basic food is not in the best security interests of the country,” as the statement released last week by the American Bakers Association put it.

It is more likely that Congress will use high prices to nibble at conservation programs that have set aside vast tracts of farm country for wildlife habitat.

House Agriculture Committee Chairman Collin Peterson (D-Minn.) recently proposed an 18 percent cut in the 39.2 million acre Conservation Reserve, which pays landowners an annual rent for removing land from farming for 10 years.

The bakers support that, and they are also urging the U.S.D.A. to use its authority to waive penalties for farmers seeking an early release from their CRP contracts.

For that, the bakers have plenty of backing from agribusiness lobbies, including poultry, dairy, pork, beef, ethanol, corn sweeteners and flour, which favor increased supplies of raw materials and lower prices.

That isn’t the case with the bakers’ other proposal, which seems to imply more far-reaching supply management. It calls on USDA to “give priority to the needs of the domestic food industry” but without saying exactly how that would be done.

After Washington’s disastrous experience with export controls in the infamous 1980 embargo on grain sales to the Soviet Union, limiting sales abroad would be a desperate and unlikely move. But some kind of domestic grain reserve, perhaps modeled on the Strategic Petroleum Reserve, may not be completely implausible if inflationary pressures continue.

In most wheat growing nations and regions (except for the United States and European Union), governments view the wheat supply as too politically sensitive to leave solely to the whims of the international market. That has been evident in the current wheat shortage. Kazakhstan’s announcement last month that it was introducing export tariffs on wheat triggered a sharp jump in wheat prices worldwide, and will affect the price of bread in the United States.

Other major wheat growers, including Argentina, Russia, Ukraine and China, have taken some wheat off the world market to address supply shortfalls at home, according to a recent article in The Wall Street Journal.

“They represent a third of global wheat exports and they all restrict trade to some degree,” said Rich Feltes, senior vice president and director of commodity research at MF Global in Chicago.

That has left the United States, Canada and the EU as suppliers of last resort, and has ratcheted up prices for millers, bakers and consumers in those places.

“Our stocks here in the United States have literally been raided because of the export tariffs and controls that have been applied by government agencies in other wheat growing nations around the world,” said one wheat dealer.

Perhaps the high grain prices are just another blip, as many farmers now contend. But if they are not, the debate over managing U.S. supplies is likely to continue and intensify.

By Dan Morgan

Farm Bill Re-Cap; Commodity Outlook

Farm Bill Re-Cap

Congressional Quarterly writer Catharine Richert reported on Friday that, “Earlier this week, Congress enacted a 30-day extension of the current farm bill, and Bush signed that measure Friday. Lawmakers are hoping to finish up negotiations on the $280 billion five-year farm policy reauthorization before mid-April, when that law will lapse.”

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