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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.

“Lawmakers and staff from the House and Senate Agriculture committees spent the two-week spring recess deciding how they’d spend an extra $10 billion above the bill’s budget baseline they’ve been promised by the Senate Finance and House Ways and Means panels.

“But there’s a problem: The Agriculture Committee members say they haven’t seen plans from the tax-writing panels on how they’ll come up with the cash.

“Lawmakers are approaching an April 18 deadline. That is when a one-month extension of the current farm law expires, the second extension since negotiations on a five-year overhaul began last year.”

Ms. Richert explained that, “Complicating matters is a scuffle in the Senate over how to spend the $10 billion above the budget baseline, assuming it can be raised. A new plan for allocating the funding, released earlier this month by the chairmen and ranking members of the Agriculture committees, called for shifting to conservation programs about $3 billion of the $5 billion originally intended for a new disaster relief trust fund.

“Senate Finance Chairman Max Baucus, D-Mont., said that was a non-starter. He was backed by another key farm bill player, Democratic Sen. Kent Conrad of North Dakota, whose home state has seen multiple droughts and floods during the last few years.”

And the CQ item indicated that, “With the April 18 deadline looming and Bush balking at a third extension unless major progress is made, lawmakers are already considering alternatives.

“Before the recess, House Agriculture Chairman Collin C. Peterson, D-Minn., and ranking Republican Robert W. Goodlatte of Virginia said they would happily write a farm bill that stays within the baseline budget in order to give farmers some certainty when they make planting decisions this year.”

To listen to an audio summary (MP3) of recent Farm Bill activity regarding the latest extension and the possibility of how a baseline Farm Bill might be funded, see this FarmPolicy.com audio podcast from March 15 (MP3- 7:52).

Commodity Issues: International Developments

Bloomberg writers Bill Faries and Karla Palomo reported on Friday that, “Argentine officials are meeting farmers today in a bid to end a strike that has forced President Cristina Fernandez de Kirchner to confront the biggest anti-government protests in more than six years.

“Farmers in parts of Argentina lifted roadblocks that led to shortages of beef, poultry and other meat after Fernandez called last night for negotiations. In the province of Entre Rios, farmers said they were waiting for ‘concrete signals’ from the government before allowing trucks to pass.

“‘This has been the most important agricultural strike in Argentine history,’ said pollster Rosendo Fraga, director of Nueva Mayoria, in an interview by Bloomberg Television. ‘The government’s top priority is to get the roadblocks lifted.’”

The article added that, “Argentines, the world’s biggest beef eaters, are facing shortages of meat and milk in supermarkets and restaurants 16 days after the strike started. Fraga said shortages could continue through next week.”

And Dow Jones writers Shane Romig and Michael Casey noted on Friday that, “While Argentine farmers temporarily halted blockades of food supplies they had maintained in protest over a soy export tax, tensions remained high Friday evening as farm group leaders met with officials in the hope of hammering out a solution to the drawn-out conflict.”

However, Reuters writer Fiona Ortiz reported on Saturday that, “Farmers reinstated their strike in parts of Argentina on Saturday after talks with the government failed to address their concerns about higher taxes on soy exports.

“The farm protest began 17 days ago, emptying meat counters and paralyzing grains exports from agricultural powerhouse Argentina, one of the world’s top suppliers of soy.

“Farm groups had called off the strike on Friday night, allowing trucks with agricultural products to circulate for the first time in more than two weeks, and sat down at the government palace for negotiations.

“The government proposed measures to protect the interests of small-scale farmers and also said it would lift a months-long ban on wheat exports during the late-night meeting.

“But farmers said they were mostly disappointed with the negotiations and roadblocks were reinstated in San Pedro in northern Buenos Aires province and in the province of Entre Rios early on Saturday.”

Meanwhile, Reuters writers Russell Blinch and Brian Love reported yesterday that, “Food prices are soaring, a wealthier Asia is demanding better food and farmers can’t keep up. In short, the world faces a food crisis and in some places it’s already boiling over.

“Around the globe, people are protesting and governments are responding with often counterproductive controls on prices and exports — a new politics of scarcity in which ensuring food supplies is becoming a major challenge for the 21st century.

“Plundered by severe weather in producing countries and by a boom in demand from fast-developing nations, the world’s wheat stocks are at 30-year lows. Grain prices have been on the rise for five years, ending decades of cheap food.”

Later, the detailed article indicated that, “After long opposition, Mexico’s government is considering lifting a ban on genetically modified crops, to allow its farmers to compete with the United States, where high-yield, genetically modified corn is the norm.

“The European Union and parts of Africa have similar bans that could also be reconsidered.

“A number of governments, including Egypt, Argentina, Kazakhstan, and China, have imposed restrictions to limit grain exports and keep more of their food at home.

“This knee-jerk response to food emergencies can result in farmers producing less food and threatens to undermine years of effort to open up international trade.”

And James Hookway reported in today’s Wall Street Journal that, “As rice prices hit new highs, farmers across Asia are hoarding their crops, raising the prospect of a shortage in Asia and Africa that could lead to widespread unrest.”

Mr. Hookway explained that, “Chookiat Ophaswongse, president of the Thai Rice Exporters Association, says farmers and millers are already holding onto their crops as prices continue to rise. Exporters who had entered supply deals with foreign buyers are now trying to find a way to compensate their customers because they can’t physically get hold of the rice, he says.

“The problem worsened after Thai Commerce Minister Mingkwan Saengsuwan predicted last week that rice would soon hit $1,000 a ton and encouraged local farmers to make the most of the situation.

“Robert Zeigler, director-general at the International Rice Research Institute in the Philippines, says it could be months before the market gets a clear sense of how high prices could go. Worse, he said, ‘The whole market could become paralyzed. Who’s going to sell rice at $750 a ton when they think it’s going to hit $1,000?’

“Markets such as the U.S. that grow most of the rice they consume are little affected by the surge in Asian export prices.

“But big importers including Indonesia and Iran may struggle to secure orders three to four months from now, when they are expected to seek as much as one million tons each.”

Commodity Issues: Corn Demand Factors- Livestock

Last week, a University of Illinois Extension article pointed out that, “Three upcoming USDA reports will provide valuable fundamental information for crop markets. These include the Quarterly Hogs and Pigs report on March 28 and the Quarterly Grain Stocks and annual Prospective Plantings report on March 31.

“The Hogs and Pigs report will reveal the size of the winter pig crop as well as the production plans of hog producers. Current and prospective hog numbers will provide some insight into potential domestic feed demand over the next year. The December report revealed a very large fall pig crop (4 percent larger than the crop of the previous year) and plans for modest expansion through the spring of 2008. The March report will indicate whether or not the high feed prices and low hog prices experienced over the past quarter changed those expansion plans. As a side note, the Cattle on Feed report released on March 20, indicated that the number of cattle on feed in lots with at least 1,000 head capacity was 2 percent larger than the inventory of a year ago and the second highest inventory for that date since the report was initiated in 1996.”

Friday’s Quarterly Hogs and Pigs Report indicated that, “U.S. inventory of all hogs and pigs on March 1, 2008 was 65.9 million head. This was up 7 percent from March 1, 2007, but down 2 percent from December 1, 2007.”

The USDA report indicated that, “The total number of hogs under contract, owned by operations with over 5,000 head, but raised by contractees, accounted for 40 percent of the total U.S. hog inventory, up from 39 percent last year.”

For a quick analysis of the inventory number, see this brief audio clip (MP3- 0:32) from the latest Commodity Week Program (WILL AM-580-Champaign, IL- recorded on March 28). Analysts indicated that large hog numbers equates to good feed usage for corn.

And John Perkins of Brownfield reported on Friday that, “John Lawrence, Iowa State University Extension Livestock Economist, says that the bigger overall inventory was influenced by the increased marketing inventory and that the breeding herd figure indicates that the higher breeding herd number means that producers and analysts will have to wait a while to see significant herd reduction. Lawrence says the outlook for the rest of 2008 and possibly the start of 2009 is ‘not very rosy’ and sees the Iowa/Southern Minnesota live basis average price around $42 to $44; comparable carcass basis price at $55 to $60. Lawrence expects the market over the next twelve months could be ‘a pretty ugly time,’ even those producers that have their buildings paid for and raise their own corn.”

Mr. Perkins included a link to an interview he conducted with Dr. Lawrence; here is an audio clip (MP3- 0:49) from their discussion.

Food Stamps, Food Aid

As international and domestic variables regarding supply and demand continue to impact commodity markets, Erik Eckholm reported in today’s New York Times that, “Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s.”

The Times article stated that, “But recent rises in many states appear to be resulting mainly from the economic slowdown, officials and experts say, as well as inflation in prices of basic goods that leave more families feeling pinched. Citing expected growth in unemployment, the Congressional Budget Office this month projected a continued increase in the monthly number of recipients in the next fiscal year, starting Oct. 1 — to 28 million, up from 27.8 million in 2008, and 26.5 million in 2007.

“The percentage of Americans receiving food stamps was higher after a recession in the 1990s, but actual numbers are expected to be higher this year.

“Federal benefit costs are projected to rise to $36 billion in the 2009 fiscal year from $34 billion this year.”

An item posted recently at The Economist Online (“Food for Thought”), stated that, “For years, anti-poverty campaigners railed against low commodity prices, which depressed farmers’ incomes in developing countries. In recent months, the world price of virtually all staples has shot up, but the activists are still not cheering. They worry that this boom (intensified by ‘green’ subsidies for biofuel crops) may worsen poverty even more than low agricultural prices did.

“High food prices do help poor farmers, but they also hurt the more numerous category of people (poor city-dwellers as well as landless rural folk) who must buy food to survive. That ‘unintended consequence’—in the words of Gawain Kripke of Oxfam International, a British charity—has caused serious problems for the organisations that bring food aid to the poorest. The World Food Programme (WFP), a UN agency, has just issued an urgent appeal for $500m, to cover higher food costs. America’s Agency for International Development (USAID), a huge financer of food aid, is asking for $350m.”

The Economist item stated that, “The short-term outlook seems grim, both for the poor and the agencies that supposedly help them. Even before the current price boom started two years ago, food aid was running at historically low levels, perhaps half the real-terms total of two decades earlier. And the WFP says hunger is on the rise in the countries it watches. It classifies as ‘hotspots’ the places—most of central Africa, plus Afghanistan—where more than a third of the people do not get as much food as is needed. A second tier, where between a fifth and a third lack adequate food, includes much of West Africa, the Indian sub-continent and Bolivia. David Kauck of CARE, an American charity, says that pockets of real hunger also exist in many rich countries.”


Karl Meilke, in an opinion item posted yesterday at The Globe and Mail Online (“Doha is not Dead”), stated that, “Many commentators assume that the Doha round of World Trade Organization negotiations have already failed, and that failure would not matter for Canadians. Wrong on both counts.”

Professor Meilke added that, “At the centre of the negotiations is agriculture, and Canada faces significant risks if this round of negotiations fails. Some think a WTO failure wouldn’t matter because we have the North American free-trade agreement, or because we can negotiate bilateral deals with other countries. Unfortunately, Canada is an attractive market for some smaller partners but pales in comparison with the giants such as India, China and the European Union. We lack the clout of large economies when it comes to asking for concessions in bilateral trade negotiations.

“This global initiative holds far more promise than negotiations with individual countries or regional blocs, especially for agriculture. Bilateral trade deals haven’t reduced the most trade-distorting forms of farm support, particularly in Europe and the United States.

“The agricultural trade reforms that can make a difference to Canada’s agrifood exporters will only be achieved in multilateral negotiations. The proposals now on the table would cut trade-distorting support significantly and provide gains for Canada’s grain, oilseed, red meat and food processing sectors.”

The editorial item also indicated that, “The biggest risk from failure is the potential to plunge the world into a period of deteriorating trade relationships that will further embitter long-standing tensions between the U.S. and the EU, and emerging conflicts with China. U.S. presidential candidates’ threats to reopen NAFTA may be posturing, but they would have to be taken very seriously if the WTO negotiations fail.

“If grievances cannot be resolved in the multilateral negotiations, there is also a significant risk that frustrated countries will increasingly turn to litigation, thereby putting the WTO under intolerable strain. Litigation can make things worse still if countries begin to ignore the WTO’s rules and findings they dislike. In agriculture, there is a well-founded concern that, if the WTO loses credibility, food safety worries with no foundation in science will be raised as a red herring issue to block trade.”

Keith Good