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Farm Bill- “Sodsaver” Debated, Vilsack, Ag Commodity Prices, and Executive Branch Issues

Farm Bill- “Sodsaver” Debated

Thom Gabrukiewicz reported yesterday at the Argus Leader Online (South Dakota) that, “As five Midwestern governors ponder whether to participate in the federal ‘Sodsaver’ program, farmers, environmentalists and others are trying to make their case for taking part or staying out of it.

“Part of the 2008 farm bill, Sodsaver would remove crop insurance coverage for five years on native grasslands that farmers plow into crop production.

“The provision seeks to protect the Prairie Pothole National Priority Area, a sweep of land from Minnesota to Montana created during the last ice age. It includes all East River counties.

“Governors in South Dakota, North Dakota, Montana, Minnesota and Iowa must decide whether to participate. They are being asked to make a decision by Feb. 15; so far, none has.”

The article noted that, “‘[South Dakota] Governor [Mike] Rounds will not make a decision until he has read the final (Department of Agriculture) rules’ governing the program, Rounds spokesman Joe Kafka said. ‘He has met with conservation groups and will meet with the other side as well.’

“The USDA’s final rules on Sodsaver are expected by late February or early March, Kafka said.”

Yesterday’s article also explained that, “Farm advocacy groups such as the South Dakota Corn Growers Association and the South Dakota Farm Bureau Federation are urging Rounds not to participate.

“As many as 26 conservation groups, including Ducks Unlimited and the Izaak Walton League of America, have aligned with the U.S. Fish and Wildlife Service and cattle ranchers to persuade Rounds to opt in.

“‘We think it’s good policy, something that needs to be considered,’ said Scott McLeod, Ducks Unlimited’s farm bill specialist in Bismarck, N.D. ‘These lands represent the most important nesting areas for native ducks, with some species only nesting in these native grasses. There’s a good reason much of it has remained grassland – it’s some of the poorest farmland out there.’

“Sodsaver would put East River farmers at a competitive disadvantage with other states that would be able to open up lands to new production without penalty, said Corn Growers Association president Bill Chase.”

Vilsack

DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, expects smooth sailing in next week’s confirmation hearing for fellow Iowan and Agriculture Secretary-nominee Tom Vilsack, but Harkin doesn’t know what the makeup of his committee will be for that hearing.

“The unresolved U.S. Senate race in Minnesota means Senate leaders have not been able to proportion membership on committee assignments. Not only is Minnesota Republican Sen. Norm Coleman’s seat on the committee uncertain, but other Republicans may have to leave the committee to make room for Sen. Mike Johanns, R-Neb., the former agriculture secretary who has expressed interest in serving on the committee.

“‘I don’t know exactly who is going to be on the committee yet,’ Harkin said in a Thursday conference call with Iowa reporters. ‘We haven’t gotten our ratios yet … Since we don’t have those ratios worked out, we’ll have to go with the existing lineup as it is.’”

Mr. Clayton indicated that, “Harkin said Vilsack, a former two-term governor, has a ‘keen political sense’ and has shown he could work in a bi-partisan fashion given that Vilsack, a Democrat, had a Republican-controlled state legislature his entire time in office. Though Vilsack grew up in Pittsburgh, Pa., and not on a farm, he has lived in a rural community of Mount Pleasant, Iowa, much of his adult life and thus understands rural issues, Harkin said.

“‘I think he has a keen sensitivity to the rural issues that confront us in agriculture,’ Harkin said.”

The Associated Press reported yesterday that, “Nebraska Sen. Ben Nelson says he expects former Iowa Gov. Tom Vilsack to win confirmation as the next head of the U.S. Department of Agriculture.

“Nelson met with Vilsack on Thursday before the former governor’s confirmation hearing next week.

“Nelson said he doesn’t see anything that would prevent Vilsack from being confirmed by the Senate. The two discussed issues affecting Midwest farmers, including conservation and alternative energy issues and a pending trade deal with South Korea.”

And a Reuters news article, which was also posted yesterday at DTN (link requires subscription) reported that, “U.S. Sen. Herb Kohl on Wednesday said he was impressed with Tom Vilsack, President-elect Barack Obama’s choice to head the U.S. Agriculture Department, and expected the former Iowa governor to be confirmed easily by the Senate.

“‘We had a good meeting. I’m confident this will be a man who will do his job very well,’ Kohl, a Wisconsin Democrat, told reporters after talking with Vilsack. ‘He talked about how important it was to see that farmers are given the opportunity to be successful.’”

Ag Commodity Prices

Meanwhile, Bloomberg writer Jeff Wilson reported yesterday that, “Corn and wheat fell, capping the biggest two-day declines in a month, as demand for U.S. supplies ebbed following four-week price rallies.

“Corn export sales were 260,597 metric tons in the week ended Jan. 1, down 56 percent from the previous four-week average, the U.S. Department of Agriculture said. Wheat sales in the week plunged 90 percent to 41,850 tons from the previous week.”

The Bloomberg article explained that, “Corn futures for March delivery fell 9.75 cents, or 2.3 percent, to $4.0675 a bushel on the Chicago Board of Trade. The price has dropped 15 percent in the past year.

“Wheat futures for March delivery fell 0.75 cent to $6.125 a bushel. The grain was down 33 percent from a year ago.

“Both commodities dropped almost 5 percent in two days. Corn jumped 33 percent in the four weeks ended Jan. 2, while wheat gained 28 percent.”

With respect to the price increase since the beginning of the new year, Dan Piller reported in today’s Des Moines Register that, “Farmers are watching corn prices climb slowly after seeing prices soar almost effortlessly to record highs last summer. Analysts say prices could reach $5 a bushel this spring.

“Corn futures climbed about $1.40 per bushel from early December to Tuesday, when they hit $4.27 on the Chicago Board of Trade. The return of some speculative hedge fund money to the market was credited for the bounceback in prices.”

Mr. Piller indicated that, “The grain rally lost steam Wednesday and Thursday. Corn futures dropped to close at $4.07 per bushel Thursday, and soybeans, which had topped $10 again early this week, closed at $9.89 per bushel on the Chicago Board of Trade. Market closing commentary from the board Thursday afternoon suggested traders had been discouraged by lower-than-expected export figures.

The recent rally was enough to lure some farmers who had kept corn and soybeans in bins after the harvest because of the low prices to begin selling grain into Iowa elevators during the first week of the new year.”

In other agricultural commodity news, the Associated Press reported today that, “A drop in oil and fertilizer costs has halved the price of rice — a staple for almost 700 million of Asia’s poorest — but it could jump again this year as farmers struggle to secure loans amid the credit crunch, experts said Friday.

The price of the regional benchmark, Thai 100 percent Grade B rice, fell to $575 per ton last October from a record high $1,080 per ton in April — a result of record production and declining oil and fertilizer costs.”

The AP article stated that, “Farmers, however, suffered losses because they were left with a lower-priced crop produced with high-priced fuel and fertilizer, said the Philippines-based International Rice Research Institute.

“The ongoing credit crisis makes it hard to secure loans for purchasing seeds and fertilizer, and farmers may plant less or switch to less expensive staples, Samarendu Mohanty, head of social sciences at the rice institute, wrote in a quarterly report.”

The institute’s agriculture experts said keeping the price of rice affordable for almost 700 million Asians living on less than $1 a day is ‘critically important for poverty reduction.’ The average household spends about half its monthly income on rice,” the AP article said.

Executive Branch Issues

Jagdish Bhagwati penned an opinion item that was posted yesterday at the Financial Times Online, in which he stated that, “In the Financial Times, I argued that, unlike with Hillary Clinton, there were several reasons why one could be optimistic that Barack Obama would follow a pro-trade policy despite ‘prudential’ protectionist talk on the primaries circuit (“Obama’s free-trade credentials top Clinton’s”, March 3 2008). But the US president-elect’s eloquent silence on trade issues – and his failure to balance his protectionist appointments with powerful trade proponents – require that we abandon these illusions and sound an alarm.

“Consider Mr Obama’s support for the multilateral trading system. It must be admitted that the Doha round is on hold and Mr Obama could not move it forward even if he so desired. A principal problem is that its completion turns critically on the US making further reductions in its distorting agricultural subsidies. But the issue has become even more difficult with the collapse of commodity prices and hence increases in support payments. Besides, history shows that the freeing of trade is nearly impossible to achieve in times of macroeconomic crisis.

But Mr Obama (unlike Gordon Brown) missed the opportunity, provided by the Group of 20’s affirmation of trade’s importance, to affirm that he attaches the highest priority to closing the Doha round and will work on this urgent task throughout his first year.”

The opinion item added that, “More important, Mr Obama has missed the bus on preventing a slide back into protectionism. His pronouncements on the car bail-out disregard the lessons of the early 1930s when the Smoot-Hawley tariff was signed into law and a competitive raising of tariff barriers ensued. We learnt then that tariffs and trade restrictions could indeed increase our national income by diverting a given amount of insufficient world demand to our markets. But then others could do the same to divert our demand to their goods, so that the result was reduced trade and deepened depression. Far better to keep markets open and increase aggregate world demand. So, the architects of the General Agreement on Tariffs and Trade (merged in 1995 into the World Trade Organisation) built into it institutionalised obstacles to an outbreak of mutually harmful trade policies.”

And on the issue of renewable energy, Philip Brasher, writing yesterday at the Green Fields Blog (The Des Moines Register) reported that, “The president-elect today gave some hints, but few details, of what he wants to include for renewable energy in the giant economic stimulus package. He says he wants to ‘double the production of alternative energy’ in three years. He didn’t say how he’s going to do that, although he mentioned wind and solar power specifically. Nothing on biofuels. And his staff offered nothing in the way of details beyond the text of his speech.

“Here’s what he said:

“‘To finally spark the creation of a clean energy economy, we will double the production of alternative energy in the next three years. We will modernize more than 75 percent of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills. In the process, we will put Americans to work in new jobs that pay well and can’t be outsourced – jobs building solar panels and wind turbines; constructing fuel-efficient cars and buildings; and developing the new energy technologies that will lead to even more jobs, more savings, and a cleaner, safer planet in the bargain.’”

Keith Good