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Farm Bill, Food Prices and Doha

Farm Bill

David Rogers, writing yesterday at Politico.com, reported that, “Farm bill talks are staring failure in the face, with a major deadline Friday, continued Democratic infighting and the commodity lobby’s stubborn resistance to altering an outdated subsidy system.

“Having raised the banner of reform, the White House appears to be playing the role of the spoiler, resisting even modest revenue-raisers accepted by House Republicans while refusing to come off the bench and pressure for some savings from direct payments to producers, now costing $5.2 billion a year even with today’s high crop prices.”

Mr. Rogers explained that, “The situation is an embarrassment for Speaker Nancy Pelosi (D-Cal.) and Senate Majority Leader Harry Reid (D-Nev.), who have been unwilling or incapable of forcing their warring chairmen to work together. Beyond the farm bill itself, the outcome could have an impact on future healthcare and trade legislation, relevant to the pending Colombia free-trade pact.

“As House-Senate negotiators go back to the table Monday afternoon, there is broad agreement on a net increase of about $6 billion in spending as part of the larger five-year package, costing more than $300 billion, according to the Congressional Budget Office’s latest estimates.

“Savings from rising crop insurance subsidies would help make room for new funds for nutrition, conservation and aid for fruit and vegetable growers. But the Senate is still demanding an additional $4 billion in disaster aid, as well as a $2.5 billion package of agriculture-related tax breaks.”

More specifically with respect to direct payments, the Politico article noted that, “Begun as a temporary measure a decade ago, the payments are now the largest single crop subsidy and are distributed regardless of production or current prices. Despite championing reform, the White House excuses this system because it serves the administration’s posture in trade talks. But with taxpayers already paying more at the supermarket, the cost has become a political liability for the entire farm bill…Just a 10 percent reduction would yield $2.5 billion in 10-year savings to help pay for the disaster aid.”

As Mr. Rogers indicated in his Politico article, the Senate-House Conference Committee held a meeting on Monday to discuss progress on the Farm Bill.

A complete replay of yesterday’s Conference gathering, which lasted about 90 minutes, can be viewed here; alternatively, a FarmPolicy.com audio podcast summary of yesterday’s meeting, which lasts about 12 minutes, is available here (MP3).

The FarmPolicy.com podcast (MP3) includes audio excerpts from House Agriculture Committee Chairman Collin Peterson (D-Minn.), House Agriculture Committee Ranking Member Bob Goodlatte (R-Virginia), House Ways and Means Committee Chairman Charlie Rangel (D-NY), Senate Finance Committee Chairman Max Baucus (D-Mont.) and Senate Agriculture Committee Chairman Tom Harkin (D-Iowa).

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “Completion of the farm bill now depends on the Senate Finance Committee and the House Ways and Means Committee reaching an agreement on offsets to pay for spending above the 10-year baseline of $597 billion, the chairmen of the House and Senate Agriculture Committee said Monday.

“But a USDA spokesman said the Bush administration was not satisfied with the offer the Senate made Friday. That proposal included spending $10 billion above the baseline cost over 10 years and protected $2.5 billion in tax breaks also in the Senate farm bill. Chris Connelly, a USDA spokesman, said the administration does not like where the Senate would come up with funding and the bill lacks needed changes in commodity programs.”

Mr. Hagstrom added that, “The House and Senate have proposed different levels of spending with different offsets. The House proposed $5.5 billion in spending above the baseline, though Peterson said Monday that House Minority Leader John Boehner, R-Ohio, had agreed to $6 billion above the baseline. The House proposed using revenue from credit-card income reporting as an offset.

“The Senate proposed financing its package thorough a combination of income from requiring stock basis reporting, an extension of customs user fees and reductions in Medicare expenditures due to a ban on physicians’ referrals to hospitals they own. ‘There are reasons for the Senate recommendation of these offsets — namely, the basis reporting proposal has the support of the corresponding industry, and in the end the White House may be more amenable to basis reporting than to the credit card reporting offset,’ said an aide to Baucus.

“Harkin and Peterson both noted that the $2.5 billion tax package in the Senate bill is still a contentious issue.”

Peter Shinn reported yesterday at Brownfield that, “House Ways and Means Committee Chairman Charlie Rangel took center stage during the second official meeting of the House-Senate Farm Bill Conference Committee. And while the House and Senate during the meeting agreed to all of the agriculture provisions in the Senate version of the farm bill, provisions that carry a $6 billion price tag over the Congressional Budget Office baseline for farm programs, inclusion of a permanent ag disaster aid program and the ag related tax provisions, both contained in the Senate farm bill, remained unresolved issues.

“At the core of those issues are the same challenges that have slowed overall progress on the farm bill for months. Namely, that the House leadership isn’t interested in supporting inclusion of ag-related tax provisions and is opposed to a permanent ag disaster aid program that isn’t under the jurisdiction of the respective Agriculture Committees.”

Mr. Shinn noted that, “At Harkin’s insistence, the House-Senate Farm Bill Conference Committee agreed to meet Tuesday morning.”

Philip Brasher, writing on Monday at the Des Moines Register’s Cash Crops Blog, stated that, “Not that anything substantive was going to get done in public. But today’s open session of the House-Senate conference committee made clear that lawmakers have a long way to go to reach a deal on the farm bill.

“The House Ways and Means chairman said the $2.5 billion package of tax credits that Sen. Charles Grassley is championing is a deal breaker for the House. Among other things, the package would create a new tax credit for cellulosic ethanol and extend the existing tax credit for biodiesel. There also would be a tax credit for people who take measures to protect endangered species.”

And Reuters writer Charles Abbott noted yesterday that, “Congress will risk a presidential veto if it includes tax provisions in the U.S. farm bill, which also is ‘very lacking’ in reforms, said the No. 2 Agriculture Department official on Monday.

“Deputy Agriculture Secretary Chuck Conner told reporters the White House would consider a veto if lawmakers persist in two revenue provisions under consideration — a so-called credit card compliance plan and a brokerage basis reporting requirement.

“Conner said the legislation, now being finalized by House and Senate negotiators, is ‘very lacking in reforms.’ He cited administration proposals to deny crop subsidies to the wealthiest Americans and to prevent windfalls by manipulation of price supports.”

Food Prices

Associated Press writer Harry Dunphy reported on Monday that, “The president of the World Bank yesterday urged immediate action to deal with sharply rising food prices, which have caused hunger and violence in several countries.

Robert B. Zoellick said the international community has to ‘put our money where our mouth is’ now to help hungry people. Zoellick spoke as the bank and its sister institution, the International Monetary Fund, ended two days of meetings in Washington.

“He called on governments to rapidly carry out commitments to provide the U.N. World Food Program with $500 million in emergency aid by May 1. Prices have only risen further since the program issued that appeal, so it is urgent that governments step up, he said.”

A World Bank press release noted on Friday that, “The crisis of surging food prices could mean ‘seven lost years’ in the fight against worldwide poverty, World Bank President Robert B. Zoellick said.

“‘While many are worrying about filling their gas tanks, many others around the world are struggling to fill their stomachs, and it is getting more and more difficult every day,’ Zoellick said at a press briefing on the eve of the IMF-World Bank Spring Meetings.”

To listen to an audio excerpt of Zoellick’s remarks regarding food prices, just click here (MP3- 3:37).

Bob Davis and Douglas Belkin reported in Monday’s Wall Street Journal that, “Finance ministers gathered this weekend to grapple with the global financial crisis also struggled with a problem that has plagued the world periodically since before the time of the Pharaohs: food shortages.

“Surging commodity prices have pushed up global food prices 83% in the past three years, according to the World Bank — putting huge stress on some of the world’s poorest nations. Even as the ministers met, Haiti’s Prime Minister Jacques Edouard Alexis was resigning after a week in which that tiny country’s capital was racked by rioting over higher prices for staples like rice and beans.”

The Journal article noted that, “Many policy makers at the weekend meetings of the International Monetary Fund and World Bank agreed that the problem is severe. Among other targets, they singled out U.S. policies pushing corn-based ethanol and other biofuels as deepening the woes.”

The Journal writers also pointed out that, “Last week, British Prime Minister Gordon Brown urged the G7 nations — the U.S., Britain, Canada, France, Germany, Italy and Japan — to develop a comprehensive strategy for the food problem, encompassing trade, agricultural productivity, technology, biofuels and short-term aid for poor countries. In the past, Britain has taken the lead in pushing the G7 to write off the debts of the world’s poorest nations.”

Andrew Martin
, writing on Tuesday at the New York Times Online, reported that, “The idea of turning farms into fuel plants seemed, for a time, like one of the answers to high global oil prices and supply worries. That strategy seemed to reach a high point last year when Congress mandated a fivefold increase in the use of biofuels.

“But now a reaction is building against policies in the United States and Europe to promote ethanol and similar fuels, with political leaders from poor countries contending that these fuels are driving up food prices and starving poor people. Biofuels are fast becoming a new flash point in global diplomacy, putting pressure on Western politicians to reconsider their policies, even as they argue that biofuels are only one factor in the seemingly inexorable rise in food prices.”

Mr. Martin explained that, “Many specialists in food policy consider government mandates for biofuels to be ill advised, agreeing that the diversion of crops like corn into fuel production has contributed to the higher prices. But other factors have played big roles, including droughts that have limited output and rapid global economic growth that has created higher demand for food.

“That growth, much faster over the last four years than the historical norm, is lifting millions of people out of destitution and giving them access to better diets. But farmers are having trouble keeping up with the surge in demand.

“While there is agreement that the growth of biofuels has contributed to higher food prices, the amount is disputed.”

The Times article noted that, “Ethanol supporters maintain that any increase caused by biofuels is relatively small and that energy costs and soaring demand for meat in developing countries have had a greater impact. ‘There’s no question that they are a factor, but they are really a smaller factor than other things that are driving up prices,’ said Ron Litterer, an Iowa farmer who is president of the National Corn Growers Association.

“He said biofuels were an ‘easy culprit to blame’ because their popularity had grown so rapidly in the last two or three years.

“Senator Charles E. Grassley, Republican of Iowa, called the recent criticism of ethanol by foreign officials ‘a big joke.’ He questioned why they were not also blaming a drought in Australia that reduced the wheat crop and the growing demand for meat in China and India.”

With respect to food aid, Mr. Martin stated that, “On Monday, President Bush ordered that $200 million in emergency food aid be made available to ‘meet unanticipated food aid needs in Africa and elsewhere,’ a White House statement said.

“His spokeswoman, Dana M. Perino, said the president had urged officials to look for additional ways to help poor nations combat food insecurity and to come up with a long-term plan ‘that helps take care of the world’s poor and hungry.’”

The Times also pointed out that, “Spreading global dissatisfaction in recent months has intensified the food-versus-fuel debate. Last Friday, a European environment advisory panel urged the European Union to suspend its goal of having 10 percent of transportation fuel made from biofuels by 2020. Europe’s well-meaning rush to biofuels, the scientists concluded, had created a variety of harmful ripple effects, including deforestation in Southeast Asia and higher prices for grain.”


A Bloomberg news article from Monday stated that, “The surge in world food prices is accomplishing what seven years of trade talks haven’t: knocking down import barriers.

“The Doha round of global trade negotiations has been stalled since 2001 because developing nations have refused to lower import tariffs that protect their farmers and rich countries won’t give up farm-price supports. Now, import duties are being slashed from Brazil to Burkina Faso in response to prices that the World Bank says have risen 83% the past three years; subsidies in the US and Europe are falling.

“‘Food prices have done for import liberalization what Doha wouldn’t have been able to achieve for a very long time,’ says Arvind Subramanian, a trade expert at the Peterson Institute for International Economics in Washington.”

“India removed a 36% import tariff on wheat flour, and Indonesia eliminated duties on wheat and soybeans. Peru jettisoned tariffs on wheat and corn. Turkey cut import taxes on wheat to 8% from 130% and on barley to zero from 100%. Mongolia scrapped its value-added tax on imported wheat and flour,” the article said.

In addition, the article indicated that, “In the US, farm subsidies are expected to fall below $US8 billion this year, down from $US13 billion in 2005, says David Orden, a senior research fellow at the International Food Policy Research Institute. European Union support of farmers fell by 10 billion euros ($US15.7 billion) from 2004 to 2006, according to the Organization for Economic Cooperation and Development in Paris.

“‘The prospect that food prices will remain relatively high in the future helps the US accept lower levels of subsidies,’ says Carlos Marcio Cozendey, economic department chief at Brazil’s foreign affairs office in Brasilia. Brazil has led a group of nations holding up the Doha round because of US and European farm subsidies.”

Meanwhile, Reuters news reported on Saturday that, “The head of the World Trade Organization said on Saturday he was ‘completely convinced’ the Doha round of world trade talks can be successfully completed this year.

“‘I am completely convinced that we have it within our means, politically and technically, to finish the Doha round this year,’ Pascal Lamy, the WTO’s director-general, said in a statement to the IMF’s International Monetary and Financial Committee, which is meeting in Washington.”

Keith Good