Congressional Quarterly writer Catharine Richert reported yesterday that, “Both parties in the House have agreed to move a 30-day extension of the farm policy law this week as negotiations continue on a five-year rewrite.
“‘We are not going to let the farm bill die,’ said House Minority Leader John A. Boehner, R-Ohio.”
“An extension would give lawmakers until mid-April to finish up work on the comprehensive bill. Congress departs for a two-week spring recess this weekend.”
Ms. Richert noted that, “It’s unclear how close to a final deal the House and Senate are, but House Agriculture Chairman Collin C. Peterson, D-Minn., told soybean farmers this week that enough progress has been made to warrant a second extension, according to an aide in his office.
“The Senate Agriculture Committee’s ranking member, Saxby Chambliss, R-Ga., said the extension indicates progress is being made, but added that no deal on the bill was expected in the next couple of days.
“Chambliss also said negotiations have been difficult with Ways and Means Chairman Charles B. Rangel, D-N.Y., out sick. The 77-year-old entered New York-Presbyterian Hospital/Columbia University Medical Center on March 4 with flu symptoms, and it is unclear when he will return to work.”
DTN writer Chris Clayton reported yesterday (link requires subscription) that, “Congress will extend key provisions in the 2002 farm bill for another month with hopes lawmakers can resolve differences in the new farm bill in that time.
“With it obvious they couldn’t meet a March 15 deadline, principal negotiators on the House and Senate Agriculture Committees agreed to extend the 2002 bill until April 18 to see if they can reach a conclusion by that time.”
Mr. Clayton indicated that, “The Senate initially was expected to pass the short-term extension Tuesday evening, but that didn’t happen, either. The House and Senate could take up the measure as early as Wednesday. Farm-bill negotiators will also again meet Wednesday and possibly Thursday as well, [Senate Agriculture Committee Chairman Tom Harkin (D-Iowa)] said.
“‘The ballpark is getting more controlled right now, and I think we are within $4 billion of reaching our goal,’ Harkin said. ‘That’s not insurmountable.’
“But money isn’t the only obstacle in getting a farm bill done. Big-picture policy differences continue popping up in the meetings between the chairmen and ranking members of the Agriculture Committees. The chairmen and ranking members had an extensive discussion about payment limits on Tuesday that didn’t get resolved. Other issues are surfacing as well. House Agriculture Committee Chairman Collin Peterson, D-Minn., said afterward he still wants to rebalance loan rates and target prices for some commodities despite the Bush administration’s adamant opposition to the idea. Harkin also wants to talk about possible cuts to direct payments and has repeatedly raised the issue of cutting direct payments, but that idea has been resisted by other leaders in the farm-bill talks.”
Reuters writer Charles Abbott reported yesterday that, “Congress and the Bush administration are $4 billion apart on funding for the new U.S. farm law and where to spend the $10 billion increase, such as a standby disaster program, said two Senate chairmen on Tuesday.
“Congress was not expected to complete work on the farm law until mid-April, six months behind schedule. Negotiators hope to agree on a farm bill ‘framework’ on funding, allocation of money and overall policy by week’s end.”
Mr. Abbott noted that, “Leaders of the House and Senate Agriculture Committees said there was no agreement yet on crop subsidy rates, stricter payment limits on crop subsidies or ‘revenue protection’ for farmers against poor yields as well as low prices.”
Meanwhile, DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “House Agriculture Committee Chairman Collin Peterson, D-Minn., said Monday he will not go along with a Bush administration farm bill proposal to end farmers’ ownership or ‘beneficial interest’ in their commodities after they have received loan deficiency payments.
“‘I am not interested in taking power away from you and giving it to the grain companies,’ Peterson told the American Soybean Association.
“His statement follows a campaign by farm and commodity groups on Capitol Hill to counter the administration’s proposal.”
And Tom Karst reported yesterday at the Fresh Talk Blog that, “Tara Smith of the American Farm Bureau reports little or no progress with farm bill talks…[S]mith said she doesn’t believe the House and Senate Agriculture Committees are seriously considering the White House ‘requirement’ that the [fruit and vegetable] planting restrictions on program crop acreage be removed from the farm bill. Farm Bureau continues to maintain that any farm bill outcome should fall within the parameters of the farm bills passed by the House and the Senate.”
Also yesterday, Senator Charles Grassley (R-Iowa) took up the issue of federal farm payment limitations in both a press conference with reporters, as well as on the floor of the Senate.
The context of his remarks were within the confines of Senate budgetary issues; however, he referred to an earlier legislative amendment regarding payment limitations that was defeated during the Senate Farm Bill debate. Despite garnering a 56-vote majority of votes, that amendment failed to pass due to legislative maneuvering that set a 60-vote supermajority requirement for acceptance. Sen. Grassley indicated that the issue was still germane even in the midst of ongoing Farm Bill negotiations.
Specifically, yesterday’s WASDE report stated that, “Projected U.S. wheat ending stocks for 2007/08 are lowered 30 million bushels this month on higher projected food use and exports. Food use is raised 5 million bushels based on the latest mill grind data from the U.S. Bureau of Census. Hard red spring wheat food use is increased on indications that discounts for spring wheat relative to winter during the first half of the marketing year encouraged heavier use. Exports are raised 25 million bushels based on the pace of export sales and shipments and on continued export restrictions by major competitor countries. Despite record prices, export commitments for U.S. wheat continue to accumulate raising prospects for higher exports of hard red winter, hard red spring, and durum wheat than projected last month. Ending stocks are projected at 242 million bushels with stocks-to-use dropping to 10 percent, the lowest since 1946/47. The projected range for the season-average farm price is narrowed 5 cents on each end to $6.50 to $6.80 per bushel.”
For reference to historic price levels of wheat, see this graph.
With respect to coarse grains the report indicated that, “U.S. balance sheets for corn and sorghum are unchanged this month…[T]he projected season-average farm prices for corn and sorghum are unchanged this month at $3.75 to $4.25 per bushel and $3.65 to $4.15 per bushel, respectively.”
For reference to historic price levels of corn, see this graph.
The WASDE report also addressed rice; stating that, “No changes are made on the supply side of the U.S. 2007/08 rice supply and use balance…[T]he season-average farm price is projected at $11.85 to $12.15 per cwt, up 55 cents per cwt on both ends of the range from a month ago and the highest price since 1980/81 ($12.80 per cwt). Tight domestic supplies, higher global prices, and a weaker dollar have contributed to the increase.”
For reference to historic price levels of rice, see this graph.
And on oilseeds, the WASDE report indicated that, “Projected U.S. soybean ending stocks for 2007/08 are reduced 20 million bushels to 140 million this month, the lowest since 2003/04. Soybean exports are raised 20 million bushels to 1,025 million reflecting strong sales, especially to China, and reduced soybean exports from Brazil as good crush margins and strong demand for soybean meal and oil result in an increase in projected crush. U.S. soybean oil production is increased this month due to an increase in the oil extraction rate. Domestic soybean oil use is reduced due to lower projected use for biodiesel. The U.S. Census Bureau has reported reduced biodiesel production from soybean oil for 6 consecutive months, and a declining share of total biodiesel production from soybean oil as soybean oil prices have climbed. Soybean oil exports are raised sharply this month reflecting strong sales and shipments through February. Stocks are also projected higher.”
“The U.S. season-average soybean price range is projected at $10.00 to $10.80 per bushel unchanged from last month.”
For reference to historic price levels of soybeans, see this graph.
For a closer look at the supply and demand situation see this USDA audio segment (MP3-one minute) from yesterday which featured World Agricultural Outlook Board Chair Gerry Bange. This audio report, filed by Rod Bain, noted that, “The March crop report shows little change in the prices of most commodities, and low ending stocks for some crops.”
Brownfield’s John Perkins indicated yesterday that, “The United States Department of Agriculture’s updated supply and demand estimates show U.S. soybean ending stocks at their lowest level in years. The USDA also lowered its wheat ending stocks figure, while leaving their corn stocks estimate unchanged.
“University of Illinois Extension Economist Darrel Good believes that the biggest surprises in the report were in the export use categories, with a slightly larger figure for beans, a substantial increase for wheat and no change on corn.”
An audio copy of a conversation Mr. Pekins had with Professor Good yesterday regarding the WASDE report is available here (MP3- five minutes).
With respect to changes in agricultural futures yesterday, the Associated Press reported that, “Wheat for May delivery rose 60 cents to $12.23 a bushel; May corn added 6.75 cents to $5.725 a bushel;; May soybeans climbed 1.25 cents to $14.0775 a bushel.”
Market attention will now be focus more narrowly on the March 31 Prospective Plantings report, which is published by USDA’s National Agricultural Statistics Service
A University of Illinois Extension update from Monday explained that, “For corn and soybeans, the immediate focus will be on production prospects in the U.S. The USDA will release its annual Prospective Plantings report on March 31. Expectations for corn and soybean planting intentions are in an extremely large range as analysts try to anticipate how producers will respond to the combination of high commodity prices and escalating input costs. A decline in corn acreage an increase in soybean acreage is expected, but the market will have an opportunity to influence final planting decisions. Last year, for example, area planted to corn exceeded March intentions by 3.15 million acres and area planted to soybeans was 3.51 million less than indicated in March.
“Beyond acreage, growing season weather in the northern hemisphere will be very important in determining crop size. U.S. production has benefitted from unusually favorable growing conditions since 1996. While regional weather problems have been experienced, the widespread weather stress experienced in years like 1980, 1983, 1988, 1991, and 1995 have been avoided. Under current conditions of low stocks and strong demand, low yields in 2008 could create the need to reduce consumption beyond what is already occurring in the U.S. livestock industry.”
The U of I report added that, “While most of the focus on March 31 will be on the USDA’s Prospective Plantings report, the Grain Stocks report might also hold some important information, particularly for corn. The December 1 Grain Stocks report showed a surprisingly small inventory of corn, implying a very large level of feed and residual use of corn during the first quarter of the 2007-08 marketing year. As a result, the USDA increased the forecast of feed and residual use of corn for the entire marketing year by 300 million bushels. The March stocks estimate will reveal if that forecast is still valid, or whether the 2007 crop might have been slightly over estimated.”
Higher prices and production allocation decisions heading into the 2008 spring planting season have taken on increased importance as news reports and editorial items focus on the impacts of food costs, energy policy and biofuels.
UN Secretary General Ban Ki-moon penned an Op-Ed, which was published in today’s Washington Post. In part, the editorial item stated that, “The price of food is soaring. The threat of hunger and malnutrition is growing. Millions of the world’s most vulnerable people are at risk.
“An effective and urgent response is needed.”
The item noted that, “The prices of basic staples — wheat, corn, rice — are at record highs, up 50 percent or more in the past six months. Global food stocks are at historic lows. The causes range from rising demand in major economies such as India and China to climate- and weather-related events such as hurricanes, floods and droughts that have devastated harvests in many parts of the world. High oil prices have increased the cost of transporting food and purchasing fertilizer. Some experts say the rise of biofuels has reduced the amount of food available for humans.
“The effects are widely seen. Food riots have erupted from West Africa to South Asia. In countries where food has to be imported to feed hungry populations, communities are rising to protest the high cost of living. Fragile democracies are feeling the pressure of food insecurity. Many governments have issued export bans and price controls on food, distorting markets and presenting challenges to commerce.”
After outlining some specific steps that could be taken to address these issues, the item concluded by saying, “Last, we must boost agricultural production. World Bank President Robert Zoellick has rightly noted that there is no reason Africa can’t experience a ‘green revolution’ of the sort that transformed Southeast Asia in previous decades. U.N. agencies such as the Food and Agriculture Organization and the International Fund for Agricultural Development are working with the African Union and others to do just this, introducing vital science and technologies that offer permanent solutions for hunger.
“Simply improving market efficiency can have a huge effect. Roughly a third of the world’s food shortages could be alleviated to a significant degree by improving local agricultural distribution networks and helping to better connect small farmers to markets.
“But that is for the future. In the here and now, we must help the hungry people hit by rising food prices. That means, for starters, recognizing the urgency of the crisis — and acting.”
(Note: In related news regarding agricultural production, biotechnology and corn, see these two FarmPolicy.com updates: “Corn Yields and Farm Policy: An Important Link” (March 2) and “Corn Yields and Farm Policy: An Important Link- Part II” (March 9)).
Reuters writer Missy Ryan reported on Monday that, “The U.S. Congress should take a hard look at laws governing purchase of food aid, which can aggravate problems for vulnerable countries, the European Union’s ambassador in Washington said on Monday.
“Ambassador John Bruton, who heads the European Commission delegation, said that procurement rules for U.S. food aid donations, which require that U.S. crops be shipped overseas, often at great cost and long delay, can distort markets and undermine agriculture in countries already reeling from famine, war or natural disaster.
“‘That’s not good policy,’ Bruton, a former Irish prime minister, told Reuters in an interview.”
Ms. Ryan explained that, “The Bush administration feels the same way, and has been pushing Congress in recent years to free up to a quarter of emergency food aid from the strict purchasing rules…[Y]et the proposal authorizing some local purchases has fallen flat again and again among lawmakers who see support to food aid programs tied to producers of wheat, corn and other crops, who benefit from the current system.
“The debate over how, and where, food aid is purchased takes on new gravity as donors, including the United States and the United Nations’ World Food Programme, struggle with soaring commodity prices that have eaten into stretched aid budgets.”
Concluding, Ms. Ryan stated that, “But it’s unclear whether the current price situation will make a difference when lawmakers from the House and Senate broker their final compromise on the 2008 farm bill.
“The Bush administration is locked in another standoff over food aid in the same bill. It insists that a measure to guarantee funds for long-term, developmental aid — up to half of the annual $1.2 billion budget for the biggest food aid program — could pull aid out of reach for up to 8 million hungry people.
“The United States has also been under pressure to loosen its procurement rules in the World Trade Organization’s Doha round of trade talks.”