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.’”
The article added that, “The House and Senate Agriculture committees are trying to put together a single bill from the farm bills that passed the House and Senate last year. The House, Senate and the Bush administration still have not reached an agreement on how to come up with the $10 billion over 10 years they have all decided to add to the farm bill above current spending, but the announcement of the allocations among titles was considered a breakthrough because preliminary budget numbers have been made public. Congress is on a two-week spring recess and will return to Washington March 31. Meantime, congressional staffers are working on the bill.”
And later, Mr. Hagstrom pointed out that, “A spokeswoman for [Senate Agriculture Committee Chairman Tom Harkin (D-Iowa)] said, ‘The goal of this farm bill is to balance farmer’s disaster needs with all the other needs for farmers in this bill: specialty crops, commodity programs and conservation with our country’s nutrition and energy needs. This table represents hard-won progress between the two chambers to move the farm bill forward. As in any framework, modifications are expected.’”
Reuters news noted on Thursday that, “The new U.S. farm law should include a fully funded disaster-relief program for farmers and ranchers, said the National Farmers Union on Thursday.
“Leaders of the House and Senate Agriculture committees tentatively allotted $2.24 billion for a disaster fund earlier this week. The figure is half of what was proposed by the Senate last December.
“NFU President Tom Buis said in a statement the leaders failed to provide ‘the necessary resources for a meaningful weather-related disaster program.’”
Philip Brasher indicated on Friday at the Des Moines Register’s Cash Crops Blog that, “The permanent disaster assistance program sought by farmers in North Dakota and other northern Plains state continues to be a key roadblock on a farm bill. This is all tied into the ongoing jurisdictional dispute between the Senate agriculure and finance committees. The disaster assistance program would be funded – and controlled in part – by the finance committee.”
Also on Friday, the Los Angeles Times editorial board indicated that, “Soaring prices for corn, wheat and other agricultural commodities aren’t just contributing to inflation, they’re increasing hunger and misery among the poor. Confronted with a chance to help, Congress is instead on a path to boost corporate welfare for wealthy farmers.
“There is much to dislike in the most recent farm bill, the five-year plan for agricultural subsidies and food stamps, but there’s something to like as well. The House version would increase spending on nutrition programs — mostly meaning food stamps but also including emergency domestic food aid and school lunch assistance — by $11.5 billion over 10 years. That is a desperately needed life preserver for the indigent. Yet as the House and Senate struggle to reconcile their separate bills, they’ve hit a serious roadblock. They’re about $10 billion over their spending limit, prompting a veto threat from President Bush. That puts the gains for food stamps in serious danger.”
The L.A. Times opinion item added that, “As negotiators work to reconcile the bills and close the $10-billion gap, they’re fighting ferociously over one of the more obscene line items in the Senate’s version: a new $5-billion disaster-assistance program intended to help growers whose crops are destroyed by drought or flood. In practice, this would simply encourage farmers to plant in drought-prone areas, knowing the government will bail them out if their crops fail. It also would encourage them to farm on environmentally sensitive land now being held in the Conservation Reserve Program — mostly poor farmland that otherwise would be considered too risky for planting. The way the negotiations are proceeding, it’s looking as if the nutrition budget will be cut in order to pay for this environmentally destructive handout.
“The cost of eating at home has risen more than 5% so far this year, the fastest rate since 1990. Food banks across the country are reporting an increase in demand as the very poor are pushed closer toward starvation. For Congress to take food out of their mouths in order to shovel more money at farmers — who are enjoying huge profits thanks to the same high food prices that are hurting the poor — would be a disgrace.”
In other opinion, Sen. Kent Conrad (D., N.D.) and Sen. Saxby Chambliss (R., Ga.) penned a letter to the editor in Friday’s Wall Street Journal, which stated in part that, “Regarding ‘Amber Waves of Green,’ Review & Outlook, March 13: The bipartisan Senate bill won one of the highest votes in Senate history on a farm bill precisely because it reforms farm programs, invests in national priorities and does not raise taxes.
“First, even after accounting for our new, fiscally responsible approach of pre-funding agriculture disaster assistance rather than relying on emergency spending, the Farm Bill — contrary to the impression left by your editorial — actually reduces spending on disaster assistance, commodity programs and crop insurance, both in dollar terms and as a percentage of total Farm Bill spending. The savings from reforming farm programs are used to feed the hungry, conserve our natural resources and boost bioenergy production so that we are less reliant on foreign oil.
“Second, as Senate members of the conference committee negotiating the final Farm Bill, we think any new spending must be fully paid for without raising taxes. That’s why we, along with our colleagues from the Senate Finance Committee, are proposing a number of spending cuts that are acceptable to the administration. In addition, we are looking at proposals from the president’s own budget plan to collect a very small amount of taxes that are already owed but are not being paid. Since the president is opposed to tax increases, it follows that non-controversial loophole closers from the administration’s budget are not tax increases.”
And last Wednesday, the Congressional Budget Office (CBO) released a letter addressed to Senate Agriculture Committee Chairman Tom Harkin (D-Iowa), which stated that, “The Congressional Budget Office and the Joint Committee on Taxation (JCT) have estimated the effects on direct spending and revenues of H.R. 2419, the Food and Energy Security Act of 2007, as passed by the Senate on December 14, 2007, relative to CBO’s March 2008 baseline projections. As requested by staff of the Senate Committee on Agriculture, Nutrition, and Forestry, this estimate assumes that certain modifications (described below) would be made to the legislation. CBO estimates that enacting the modified legislation would increase direct spending by $9.6 billion over the 2008-2018 period, relative to the baseline projections and assuming that the legislation would remain in effect throughout the period. JCT estimates that revenues would increase under the proposal by $4.5 billion over the same period. On balance, those changes to the unified budget would produce net costs (increases in deficits or reductions in surpluses) of $5.1 billion over the 11-year period. The enclosed table provides more details on those estimates.”
EU- Common Agricultural Policy
Last week, in an update posted at her blog, European Commissioner for Agriculture and Rural Development Mariann Fischer Boel stated that, “When I read the comments on my blog and in the debate section of the press, my impression of public opinion on the CAP [Common Agricultural Policy] is a bit of a patchwork. Some people passionately denounce the very idea of reform; with equal passion, others yell at us to go faster. However, at the end of the day the million-euro question is always: What do those people think who are not actively participating in the public debate – the silent majority?
“The main goal of reforming the CAP is to bring it in line with society’s needs and expectations. And by ‘society’ I mean the entire population of the EU – not just those with sharp pens or strong lungs. One of the ways of finding out what the average European thinks is by conducting a survey.”
After noting some details about the survey, Commissioner Fischer Boel stated that, “The survey, which interviewed around 1 000 people in each of the 27 Member States, confirms that people are in general positive about the key elements of the 2003 CAP reform – including the way we now support farmers. A clear majority thinks that we are moving in the right direction by paying farmers directly instead of subsidising their products, and by spending more money on rural development.”
For more background and context on reforms regarding the EU’s Common Agricultural Policy, see Roger Waite’s “Analysis from Brussels” column, which was posted exclusively at FarmPolicy.com on Friday.
Doha – Trade
Alan Beattie reported on Thursday at the Financial Times Online that, “Global trade slowed almost to a standstill over the new year, threatening to shrink for the first time since the US economy went into recession in 2001.
“An indicator produced by the Bureau for Economic Policy Analysis, a Dutch research institute, showed that in the three months to January world trade in goods rose at annualised rate of 0.2 per cent over the previous three months.
“The equivalent growth rate in the three months to October was 6.9 per cent.
“‘This is a substantial deceleration,’ the institute said. ‘World trade volume growth is on a downward trend.’”
With this background on trade in mind, Dow Jones writer Patricia Jiayi Ho reported last week that, “U.S. Trade Representative Susan Schwab said Thursday that China shares the U.S.’ goal of concluding the Doha round of World Trade Organization talks this year.”
The article added that, “Schwab called for ‘meaningful market liberalization’ in China.
“‘Given the incredible benefits that China derives from the global trading system and the WTO, it is absolutely imperative that China plays a responsible role in the Doha round negotiations and in the WTO in general,’ she said.
“‘We really want to see China step up.’”
An item posted on Friday at Xinhua Online stated that, “China’s new Vice Premier Wang Qishan met with U.S. Trade Representative Susan Schwab here on Friday, pledging China’s constructive role as a bridge in the Doha Round negotiations.
“Wang told Schwab, who was here to secure China’s support for the Doha talks, that China valued the Doha Round negotiations. Whether the talks could see a successful conclusion concerns both the sustained development of the world economy and the healthy world trade.
“He said the new waves of trade protectionism hurts both countries, and called for joint efforts to maintain and enhance the multilateral trade system.”
And a recent AFP article noted that, “A White House economic affairs advisor said Friday that developing countries have more to gain than the rich north from the lower tariffs the United States is seeking in the Doha round of trade talks.
“‘The Doha round is often incorrectly characterized as a North-South issue. In fact, developing countries have the most to gain from the cut in tariffs from other developing countries,’ Daniel Price told a trade meeting in Hanoi.
“‘Around 70 percent of tariffs paid by developing countries are paid to other developing countries’ he added, adding that trade between developing countries is increasing 50 percent faster than overall trade.”
Growth – Biofuels
Justin Lahart, Patrick Barta and Andrew Batson reported in today’s Wall Street Journal that, “Now and then across the centuries, powerful voices have warned that human activity would overwhelm the earth’s resources. The Cassandras always proved wrong. Each time, there were new resources to discover, new technologies to propel growth.
“Today the old fears are back.
“Although a Malthusian catastrophe is not at hand, the resource constraints foreseen by the Club of Rome are more evident today than at any time since the 1972 publication of the think tank’s famous book, ‘The Limits of Growth.’ Steady increases in the prices for oil, wheat, copper and other commodities — some of which have set record highs this month — are signs of a lasting shift in demand as yet unmatched by rising supply.”
The Journal writers added that, “As the world grows more populous — the United Nations projects eight billion people by 2025, up from 6.6 billion today — it also is growing more prosperous. The average person is consuming more food, water, metal and power. Growing numbers of China’s 1.3 billion people and India’s 1.1 billion are stepping up to the middle class, adopting the high-protein diets, gasoline-fueled transport and electric gadgets that developed nations enjoy.
“The result is that demand for resources has soared. If supplies don’t keep pace, prices are likely to climb further, economic growth in rich and poor nations alike could suffer, and some fear violent conflicts could ensue.”
And, the article explained that, “Some of the resources now in great demand have no substitutes. In the 18th century, England responded to dwindling timber supplies by shifting to abundant coal. But there can be no such replacement for arable land and fresh water.”
“Americans already are grappling with higher energy and food prices. Although crude prices have dropped in recent days, there’s a growing consensus among policy makers and industry executives that this isn’t just a temporary surge in prices. Some of these experts, but not all of them, foresee a long-term upward shift in prices for oil and other commodities,” the Journal said.
Later, the authors stated that, “A growing taste for meat and other higher-protein food in the developing world is boosting demand and prices for feed grains. ‘There are literally hundreds of millions of people…who are making the shift to protein, and competition for food world-wide is a new reality,’ says William Doyle, chief executive officer of fertilizer-maker Potash Corp. of Saskatchewan.
“It takes nearly 10 pounds of grain to produce one pound of pork — the staple meat in China — and more than double that to produce a pound of beef, according to Vaclav Smil, a University of Manitoba geographer who studies food, energy and environment trends. The number of calories in the Chinese diet from meat and other animal products has more than doubled since 1990, according to the U.N. Food and Agriculture Organization. But China still lags Taiwan when it comes to per-capita pork consumption. Matching Taiwan would increase China’s annual pork consumption by 11 billion pounds — as much pork as Americans eat in six or seven months.”
The Journal article also contained this very interesting graphic illustration.
More specifically with respect to biofuels, Patrick Barta reported in today’s Journal that, “The world’s economy is acquiring a new energy addiction: biofuels.
“Crop-based fuels such as ethanol and biodiesel are quietly becoming a crucial component of the global energy supply, despite growing concerns about their impact on the environment and world food prices.
“Biofuels production is rising rapidly, while other fuel sources are failing to keep pace with demand. As a result, biofuels are making up a larger portion of the world’s energy-supply gap than many analysts expected. That means the debate over biofuels probably will shift from whether they are good or bad to the more difficult question of how to make sure their production keeps growing — without wreaking economic and environmental havoc.”
Another item from today’s Wall Street Journal included a summary of opinion from key leaders in the energy sector. As the Journal noted, “Patricia Woertz, ADM’s CEO and president, and Robert Lukefahr, president of BP Alternative Energy, talked to The Wall Street Journal’s Alan Murray about biofuels and other matters. Here are edited excerpts from that discussion.”
The Journal transcript included this exchange: MR. MURRAY: Of the research that you have going at ADM right now, what looks the most promising in terms of biofuels?
“MS. WOERTZ: When people think about cellulosic ethanol, they may think switchgrass fermented to ethanol. But I think of it in three spots. What is the feedstock? What is the conversion technology? And what is the end or intermediate product? And so we look along that matrix of the things that might have the biggest promise for the future. And we have about five of them that are either partnerships or things we’re doing alone.”
In a separate Q & A item from today’s Wall Street Journal, The Wall Street Journal’s Kimberley A. Strassel had this exchange with Vinod Khosla, managing partner of Khosla Ventures and Red Cavaney, president and CEO of the American Petroleum Institute.
“MS. STRASSEL: Give me a year in the future when you think we’re going to have a viable cellulosic ethanol industry.
“MR. KHOSLA: Starting next year.
“MS. STRASSEL: Commercially viable?
“MR. KHOSLA: The first commercial plants that are cheaper than both oil and corn ethanol are targeted to start operation at the end of next year, probably be in full operation in 2010.
“MS. STRASSEL: When you say cheaper than oil, is that standing on its own or with–
“MR. KHOSLA: Every time I talk about cheaper, I mean unsubsidized market competitiveness. Whether you get subsidies on top or incentives doesn’t matter. Every single effort I talked about is meant to be competitive with oil at $45 a barrel, unsubsidized, within five years.
“MS. STRASSEL: Red, what year?
“MR. CAVANEY: I don’t know the exact year, but it’s later rather than sooner, not that we won’t make the technical breakthrough, not that Vinod’s plant won’t come on and produce it. But to really have a meaningful impact, you need to get the volumes up.”