January 21, 2020

Doha, Global Commodity Issues, Biofuels and the Farm Bill


Reuters news reported on Thursday that, “Ministers may not meet until May to hammer out a Doha trade deal, the head of the World Trade Organisation said on Thursday.

“‘I would be surprised if I needed the ministers in town before the end of April,’ WTO Director-General Pascal Lamy told Reuters at a meeting of African finance ministers.

“‘But I wouldn’t be surprised if the meeting happened by the end of May.’”

And, an AFP article from Friday indicated that, “World trade ministers have called off a meeting planned in Geneva for this month in the absence of sufficient progress toward a global trade liberalization deal, a source close to the talks said Friday.

“But he added that some headway had been made in discussions on reducing barriers to agricultural trade, making a ministerial meeting possible in May.

“Negotiations aimed at securing a preliminary agreement on trade in agricultural and industrial products haven’t advanced as much as had been hoped at the start of the year, he said.”

Meanwhile, Reuters writers Adriana Garcia and Missy Ryan reported on Thursday that, “The deepening gloom over the global economy may augur well for trade talks, a top U.S. official said, as negotiators suggested the Doha round is on the cusp of a breakthrough after years of acrimony and delay.

“‘There is a growing sense that, given the concerns about … slowing growth in the global economy, that ministers are even more focused on opportunities that would provide a shot in the arm,’ Deputy U.S. Trade Representative John Veroneau told the Reuters Latin America Investment summit on Thursday.

“Veroneau, the Bush administration’s lead trade negotiator for Latin America, said it is too early to tell when ministers from the World Trade Organization’s 151 member countries would be ready to gather in Geneva for a meeting widely expected to seal a long-awaited breakthrough in the talks.”

The article explained that, “The stakes are high for the United States, Veroneau said, which is seeking to contain a deepening housing and credit crisis and reinvigorate its slowing economy.

“Governments the world over are under pressure, too, as they try to shield themselves from U.S. economic woes and seek to manage the destabilizing effects of record-high prices for fuel and basic foodstuffs such as bread and milk.”

Later, Garcia and Ryan stated that, “While a deal may still be had before President George W. Bush steps down in January 2009, Veroneau acknowledged it would be difficult at this stage to be able to send a finalized deal to Congress this year.”

Reuters writers Adrian Croft and Sebastian Tong reported on Saturday that, “The IMF is due to release its twice-yearly World Economic Outlook next week.

“Earlier in the week, the IMF cut its 2008 outlook for world economic growth for the second time this year — a move that acknowledged housing and credit problems in the United States were exacting a heavy toll on the global economy.

“The IMF now expects global growth to slow to 3.7 percent this year, down from its January forecast of 4.1 percent.”

The article concluded by noting that, “One bright spot was talk of improving prospects for a breakthrough in the long-running talks on world trade liberalisation.

“WTO chief Pascal Lamy said the Doha round of talks were ‘inevitably long and complex.’

“‘My feeling is that we are now reaching a stage where it (an agreement) could happen,’ he said.”

And, an item posted today at The Australian Online stated that, “As [Australian Prime Minister Kevin Rudd] acknowledged after meeting European leaders in London, agreement on Doha is still a long way from sealed, but he remains more optimistic than many.

“Ultimately, Mr Rudd could become another in a long line of Australian leaders who have misjudged the difficulty of the task of reaching multilateral agreements through the World Trade Organisation. Alternatively, he could come to be seen as a global player who was able to call it early. For Mr Rudd, the Doha talks also from part of a broader strategy to forge stronger direct links between Australia and the European Union.

“There is always a danger that to get a deal done on Doha, the participants will settle for a pragmatic solution that falls short of the high ideals set when the Doha round of talks began. But there is a new urgency to finding an agreement because of the looming US presidential elections and to provide what Mr Rudd has described a ‘shot in the arm’ to restore confidence to the global financial system.

“Australian farmers would be big winners from any conclusion to the Doha round of negotiations on agricultural goods, which Mr Rudd said could deliver cuts of up to two-thirds or more to trade-distorting tariffs in developed countries. Negotiations on manufactured goods continues to be problematic, with developing countries, led by Brazil and India, arguing for a continuation of tariff protection.”

For more on the WTO and the Doha Round of trade talks, see, “Time to Rethink the WTO System: The United States, the European Union, and World Trade,” which was written by Hugh Corbet, President of the Cordell Hull Institute, and Joe Guinan, a Program Officer with the German Marshall Fund of the United States.

The paper, which was published in March, “argues that there is a need for reflection on the purpose of the WTO system. Putting the rapid integration of the world economy in perspective, this paper dwells on American and European leadership, or lack thereof, and on the major threats to the WTO system over agricultural protectionism and the proliferation of trade agreements. The authors conclude with alternative broad approaches to the further liberalization of trade.”

Global Commodity Issues

Dow Jones News reported today that, “Kazakh Prime Minister Karim Masimov told his Cabinet Monday to consider imposing export duties or fully suspend grain exports, Kazakh state news Kazinform reported Monday.

“‘I’m ordering Ministry of Agriculture and Ministry of Industry and Trade to consider possibilities of imposing customs duties on (grain) exports or fully banning exports of grain,’ Masimov was quoted by Kazinform as saying. ‘The global tendency is alarming, prices of bread are rising inexorably.’”

Bloomberg News reported today that, “From Cairo to New Delhi to Shanghai, a run on rice is threatening to disrupt worldwide food supplies as much as the scarcity of confidence on Wall Street this year roiled credit markets.

“China, Egypt, Vietnam and India, representing more than a third of global rice exports, curbed sales this year, and Indonesia says it may do the same.”

James Kirkup, in an article posted today at The Telegraph Online reported that, “Rising food prices threaten economic stability and could trigger riots, Gordon Brown has been warned.

“The World Bank said this week that the price of staple foods has risen by 80 per cent in the past three years. For consumers in wealthy nations such as Britain soaring prices are squeezing household finances and keeping inflation up. But for developing nations they can lead to malnutrition and social disruption.

“Food prices are being driven up by shortages of supply – often caused by bad weather – and by rising demand.”

And Michael Casey and Matt Moffett reported in today’s Wall Street Journal that, “After just four months on the job, Argentina’s economy minister, Martin Lousteau, is at the center of the country’s biggest political crisis in five years, with rebellious farmers blaming him for what they say is an unjust tax system.

“The 37-year-old Mr. Lousteau’s political future may rest on how he handles coming negotiations with the farmers, who on Wednesday announced a 30-day suspension of a three-week strike that had left supermarket meat counters and produce sections bare. Farmers want the government to rescind a recently announced increase in soybean export duties.”

The Journal article noted that, “Mr. Lousteau defends the tax boost, which he says aims to do more than just raise revenue for the government of President Cristina Kirchner, a populist. He says he wants to wean Argentina from an increasing dependence on soybeans by making them a less lucrative crop. Argentine farmers have been switching tens of thousands of acres to soybeans from cattle or grains to capitalize on high soybean prices. Almost a quarter of the country’s tax revenue now comes from soybean export duties.

“‘Soy displaces and drives up the cost of other activities,’ Mr. Lousteau said in a recent speech. ‘It raises the price of land. It has a monoculture effect, and it has a very low impact on employment.’”

New York Times Op-Ed Columnist Paul Krugman opined in today’s paper that, “These days you hear a lot about the world financial crisis. But there’s another world crisis under way — and it’s hurting a lot more people.

“I’m talking about the food crisis. Over the past few years the prices of wheat, corn, rice and other basic foodstuffs have doubled or tripled, with much of the increase taking place just in the last few months. High food prices dismay even relatively well-off Americans — but they’re truly devastating in poor countries, where food often accounts for more than half a family’s spending.

“There have already been food riots around the world. Food-supplying countries, from Ukraine to Argentina, have been limiting exports in an attempt to protect domestic consumers, leading to angry protests from farmers — and making things even worse in countries that need to import food.”

Concluding, Mr. Krugman indicated that, “Cheap food, like cheap oil, may be a thing of the past.”

U.S. / EU Biofuels

An item posted last week at the Environmental Capital Blog (The Wall Street Journal) stated that, “Beyond the wild swings in agricultural commodities markets, such as corn and soy, which end up hitting consumers in the grocery store, or federally-mandated increases of production of biofuels which aren’t even out of the lab yet, there is another problem the recent energy bill failed to address: export subsidies for biodiesel.

“The U.S. taxpayer forks over a $1 subsidy for every gallon of biodiesel that is blended in the U.S. for export later. The idea was to give a nudge to the U.S. biofuel industry. But it is boomeranging, as the Guardian reports today in the latest installment on biodiesel ‘splash-and-dash.’ (Other stories on this here, here, and here.)

“Increasingly, traders ship biodiesel from Asia or Europe to U.S. ports, where it is blended with a ‘splash’ of regular diesel, the paper reports. That qualifies the shipment for U.S. export subsidies. Then it is shipped back to Europe where it is also subsidized. European biofuels organizations talk about between $30 million and $300 million in U.S. subsidies being exported that way to Europe.”

The WSJ Blog item added that, “That’s what sparked an investigation last year by the European Biodiesel Board into a practice that was an open secret among biofuel firms. The EBB has been making noises since late last year about taking the dispute to the World Trade Organization, and wants the European Union to retaliate with import duties on U.S. biofuel.”

Farm Bill- U.S. Ag Economy

Gary Wulf reported in today’s Wall Street Journal that, “The surge in grain prices has caused U.S. Midwestern land values to rise as well, but prices have now expanded so far, so fast that some experts worry that the farmland market has become a bubble waiting to burst.

“‘Recent increases in farmland prices raise questions about whether the farmland price increases are outpacing increases in farmland returns,’ said Gary Schnitkey, farm financial-management specialist at the University of Illinois extension program.”

“With corn, soybean and wheat prices soaring to record levels earlier this year, farmland prices also have been pushed to unprecedented heights. The U.S. Department of Agriculture estimated that the price of an average acre of U.S. cropland rose 13% in 2007, to $2,700, more than double the $1,340 price of 1998. It predicts another 15% rise this year,” the article said.

Later, Mr. Wulf stated that, “Mr. Schnitkey at the University of Illinois said farmland prices in his state are now 46% higher than capitalized values, which is the earning potential of that land from agriculture.

“‘Either a new relationship between farmland prices and capitalized values exists, where farmland prices exceed capitalized values by a large margin — possibly caused by more urban demand for farmland — or growth in farmland prices must slow, so that capitalized values catch up with farmland prices,’ he said.

“Any decline in cash prices for wheat or soybeans — or other crops — would hurt the land’s profit potential, driving down capitalized values even further.”


On Thursday, DTN writer Chris Clayton reported (link requires subscription) that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, had talked for more than a year about crafting a ‘forward-looking’ farm bill. Now, he just wants a farm bill that’s ‘better than nothing.’

“Harkin confirmed Thursday that the Senate and House Agriculture Committees had indeed agreed to the framework leaked last week detailing how the $10 billion above baseline in spending would be split, as well as paring out cuts in crop insurance and other areas to pay for the other boosts in nutrition, conservation and commodity programs.

“Harkin was not enthused about the final deal, but he said he could live with the framework.”

Mr. Clayton noted that, “On conservation, Harkin is upset that the funding will end up at $4 billion above baseline, rather than the $4.9 billion originally built in. Still, it does keep the $1.28 billion he has set aside for the Conservation Security Program and the potential is still there for the CSP to jump to as much as 80 million acres by the end of this new farm bill.

“Environmental Defense, the Environmental Working Group and Defenders of Wildlife joined Rep. Ron Kind, D-Wis., in his news conference Thursday to protest a lowering of the conservation budget increase, [related podcast available here (MP3- 4:38)] but the Theodore Roosevelt Partnership and other conservation groups have endorsed the $4 billion plan because it uses some money saved from lowering the Conservation Reserve Program cap for other conservation programs.

“Kind said that he disagrees with the framework plan to lower the acreage cap on the land-idling CRP from 39.2 million acres to 32 million acres. But Harkin said that so many farmers are taking land out of the CRP to put in back into production in response to high commodity prices that ‘we’ll be lucky to be at 30’ million acres.”

Audrey Hoffer reported on Friday at the Milwaukee Journal Sentinel Online that, “Reps. Ron Kind and Paul Ryan blasted a proposal by congressional farm bill conferees to eliminate almost $1 billion from conservation programs so the money can be used to partially fund a new agricultural disaster assistance program.

“‘We need a farm bill, and we need it soon,’ Kind, a Democrat from La Crosse, said Thursday. ‘But we need a good bill that is justifiable to the American taxpayer and meets the needs of all farmers, not just a few.’”

Keith Good

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