FarmPolicy

October 18, 2017

Vilsack Hearing, and Trade Issues

Vilsack Hearing

Associated Press writer Mary Clare Jalonick reported today that, “President-elect Barack Obama’s pick for agriculture secretary, former Iowa Gov. Tom Vilsack, was expected to face an agreeable group of senators as he takes questions from the Senate Agriculture Committee.

“The farm-friendly panel has had few qualms with Vilsack, who served eight years as chief executive of a state that is a leading U.S. crop producer. The Democratic chairman of the panel is Iowa Sen. Tom Harkin, one of Vilsack’s biggest supporters. His confirmation hearing was set for Wednesday.

“Vilsack did not focus heavily on agricultural issues as governor. But he headed gubernatorial groups that focused on biotechnology and ethanol.”

The AP article indicated that, “Vilsack has been a champion of corn-based ethanol, making it a central part of his short-lived campaign for president in 2007 and endorsing tax breaks for the ethanol industry. Renewable fuels policy, including subsidies for that industry, is expected to be a top issue for the incoming secretary.

The former governor is expected to push the president-elect’s pledge to trim some wasteful farm subsidies, a position that Harkin and many other Midwestern members have endorsed. Southern lawmakers have long blocked lowering subsidy limits, however, as Southern rice and cotton crops require more investment.”

Philip Brasher reported yesterday at The Des Moines Register Online that, “Barring a last-minute hitch, Vilsack could take office Jan. 20, the same day President-elect Barack Obama is sworn in.”

The Register article stated that, “A Vilsack-led Department of Agriculture must write rules on a number of programs enacted by Congress in the 2008 farm bill.”

Mr. Brasher pointed out that, “The Bush administration has yet to release new rules for the Conservation Security Program, which was revamped under the farm bill to target funding to farmers who take new steps to improve their environmental practices.

“The program, which was authored by Sen. Tom Harkin, D-Ia., has been hampered in the past for lack of funding. Vilsack needs to speed release of the new rules so additional farmers can get enrolled, said Ferd Hoefner of the Sustainable Agriculture Coalition.”

At the Des Moines Register’s Green Fields Blog yesterday, Mr. Brasher posted a copy of Gov. Vilsack’s prepared opening statement, which is expected to be delivered at today’s Senate hearing.

In part, Gov. Vilsack is expected to point out that, “Today our country and the Department of Agriculture again face historic challenges. Farmers and ranchers experience volatile markets while credit tightens. Small towns and rural communities continue to lose people and jobs while critical infrastructure crumbles. These towns and communities find it increasingly difficult to keep pace with the ever-changing national and global economy. Recent economic woes caused a dramatic increase in the number of Americans needing the food assistance programs under USDA jurisdiction. The nation looks to our rural areas for a sustainable source of food and energy at the same time the world looks to America for leadership in combating global climate change. The health care crisis aligns squarely with the need to promote more nutrition in our diets. All this is happening while the world population continues to grow at a rate that may in our lifetimes challenge our capacity to grow and raise enough food. If this weren’t enough, a national treasure – our forests – are under attack by uncontrollable wildfires and invasive species.

“All of these are serious challenges that require a compelling new vision for the Department with the attention, dedication, and leadership to make it happen.”

Gov. Vilsack is also expected to say that, “I am under no illusion about the difficulty we face, but I also recognize the commitment Congress has made with the passage of the 2008 Farm Bill. USDA’s job is to implement that far-ranging piece of legislation promptly and consistent with congressional intent. If confirmed, I will commit to work immediately to implement the 600 programs and 15 titles of the Farm Bill, including prompt implementation of the Conservation Stewardship Program and Disaster Payment Programs, and to leverage the financial commitment of the stimulus bill with other public sector and private resources to realize the full promise of rural America.

“None of this will be possible without 21st century technology. We need to provide Congress with a workable and realistic plan to implement the technology changes necessary to bring the Department into the 21st century. If confirmed, I look forward to working with you to do just that.”

With respect to progress to date on implementing the 2008 Farm Bill, a news release issued yesterday by USDA stated that, “In seven months after late summer congressional passage of the 2008 Farm Bill, the U.S. Department of Agriculture has put in place much of the key components and prepared next items for action by the incoming Administration Jan 20. The 2008 Farm Bill is approximately 50 percent larger than its predecessor, the 2002 Farm Bill, with 15 titles and more than 600 provisions. In total, 170 regulatory actions and over 100 reports and studies have been identified that the Department is required to complete to fully implement.

“‘USDA employees continue to work hard to implement all the provisions of the farm bill in an efficient and expeditious manner,’ said Agriculture Secretary Ed Schafer. ‘Producers and consumers should be confident that USDA has laid the foundation for the next Administration to continue this success.’

“‘Within weeks of its enactment USDA began delivering program benefits for 2008 and efforts continue today to ensure the delivery of additional program benefits in 2009,’ said Deputy Agriculture Secretary Chuck Conner. ‘We have held hundreds of meetings with stakeholders on almost all titles of the Farm Bill, and continue to have USDA representatives available to follow-up.’”

Yesterday’s news release went on to note specific highlights of USDA accomplishments, including this point: “Implemented the 2009-2012 DCP and Average Crop Revenue Election (ACRE) Program on December 29, 2008. Signup for 2009 DCP is underway and will continue through June 1, 2009, advance payments are currently being issued.”

Meanwhile, University of Illinois Agricultural Economists Dale Lattz, Gary Schnitkey and Nick Paulson provided an excellent overview of the new ACRE (Average Crop Revenue Election) program in a document posted on Friday entitled, “Questions and Answers About the ACRE Provision of the 2008 Farm Bill.”

In related news regarding the new administration, Reuters writer Christopher Doering reported yesterday that, “A majority of U.S. farmers are in favor of a farm subsidy cap of $250,000 a year and strict rules on payment eligibility, but they are not strong supporters of who could be responsible for making these changes: Barack Obama.

“A Reuters survey of 820 of the 5,350 farmers attending the American Farm Bureau Federation’s annual meeting found 72 percent of the respondents did not believe the Obama administration would be responsive to their needs.

“U.S. farmers, who tend to be social and fiscal conservatives, have traditionally supported Republicans. Nearly 20 percent of Americans live in rural areas.”

Mr. Doering indicated that, “Farm Bureau President Bob Stallman said that, while there was uncertainty over Obama’s policy on environmental regulation and how it will affect agriculture, the president-elect made several positive comments toward agriculture during the campaign.

“‘I am not that pessimistic, personally,’ said Stallman. ‘I think the concern that farmers have right now is an unknown, and not knowing creates anxiety.’

“As a candidate, Obama supported further reform in the farm community, including a $250,000-a-year cap on payments and an end to loopholes that allow big farmers to evade payment limits. He will be sworn into office on January 20.”

And a separate Reuters item from yesterday stated that, “U.S. farmers and ranchers expect farm income to fall during 2009 on higher input costs and lower commodity prices, prompting many to reduce expenses, according to a Reuters survey of 820 farmers.”

With respect to agricultural commodity prices, Jason Womack reported in today’s Wall Street Journal that, “CORN: Chicago Board of Trade futures fell sharply for a second straight day, as the market continued to weigh the impact of higher-than-expected production and supply estimates from the Agriculture Department. March corn fell 18.25 cents to $3.6250 per bushel.

“SOYBEANS: Prices rose as traders focused on continued dry weather in South America, the second-largest soybean-producing region. Weeks of dry conditions have hurt developing crops there. CBOT March soybeans finished 5.5 cents higher at $9.7150.”

The USDA’s Economic Research Service (ERS) released its latest Oil Crops Outlook report yesterday, which stated in part that, “In December, U.S. soybean prices rallied because the ominously dry weather in South America threatened soybean yields. As of early January (for the first time in 3 months), cash soybean prices were back over $10 per bushel. In contrast to the processors, farmers have benefited from the forward sales commitments they made last summer, which have supported monthly price averages for September-December 2008. USDA narrowed its forecast of the 2008/09 average farm price to $8.50-$9.50 per bushel from $8.25-$9.75 previously.”

And with respect to rice, ERS noted in yesterday’s Rice Outlook report that, “There were several revisions to the U.S. 2008/09 rough-rice balance sheet this month. First, the season-average farm price was raised $1.35 per hundredweight (cwt) on both the high and low ends to a record $16.50-$17.50 per cwt, well above $12.80 in 2007/08. The upward revision was partly based on higher-than-expected monthly U.S. rough-rice prices—especially for medium/short-grain rice—through mid- December.”

Yesterday’s ERS report also noted that, “In 2008/09, rice plantings increased in every reported State except California, primarily due to extremely high prices at planting and expectations of high prices in 2008/09. At 470,000 acres, rice plantings in Louisiana were up 24 percent from a year earlier. Plantings in Arkansas expanded 5 percent to 1.4 million acres. In Mississippi, rice plantings of 230,000 acres were up 21 percent from 2007. Texas plantings expanded 20 percent to 175,000 acres. Missouri’s plantings of 200,000 acres were up 11 percent from 2007. In contrast to the South, plantings in California declined 3 percent in 2008/09 to 519,000 acres.”

Trade Issues

Kelly Evans, John W. Miller and Mei Fong reported in today’s Wall Street Journal that, “Trade among nations is declining sharply around the world, an unusual development even in a recession — and one that makes it more difficult for countries to pull out of their economic dive.

“Combined exports and imports by the U.S., the world’s biggest economy, dropped 18% in the four months from July to November, to $326 billion from nearly $398 billion, according to Commerce Department figures released Tuesday. Two-thirds of the drop was in imports, which helps explain why so many countries dependent on trade with the U.S. are suffering: Their exports, a key source of growth, are falling as spending by U.S. consumers and companies continues to sour.”

The Journal article explained that, “While the growth of global trade generally slows during recessions, it doesn’t usually contract world-wide; the last time it did was 1982. But in December, the World Bank projected global trade would decline by 2.1% this year. That would top the 1.9% decline seen in 1975, the biggest since World War II.

“The recent trade declines are accentuated by a sharp fall in commodity prices, including a historic slide in the price of oil. Petroleum imports alone drove just over half the total U.S. declines in November from the previous month, falling $13.6 billion while U.S. imports overall fell by $25 billion.”

In a related editorial item regarding trade and the Doha round of WTO trade talks, Peter Mandelson, the former EU Trade Commissioner, penned an item that was posted today at The Wall Street Journal Online Opinion Europe section.

The piece, which was entitled, “Obama Should Make Doha a Priority,” stated that, “The in-tray of U.S. President-elect Barack Obama just keeps getting heavier. Few, if any, U.S. presidencies have begun under greater weight of expectation, at home and abroad. The president-elect has signaled some clear intentions. There will be concerted stimulus action to pull the U.S. economy out of recession. There will be the greenest U.S. administration in history, with a clear mandate to address global warming.

“But where will the U.S. come down on the critical question of global trade? In particular, I mean completing the Doha round of world trade talks, launched at the start of George W. Bush’s presidency but left hanging late last year. It is no exaggeration to say that U.S. leadership will be the deciding factor in a deal in 2009. A deal will only happen if the crucial trade dossier is close to the top of the White House pile.”

Mr. Mandelson added that, “The positions in the Doha negotiation remain broadly where they stood when the negotiations stalled in July, after a nine-day ministerial meeting that came closer than ever before to a deal. India believes that large agricultural exporters like the U.S. are asking for more new market access than their subsistence farmers can bear. The U.S. continues to argue that what India is offering its farmers and manufacturers won’t give them enough access to foreign markets to justify commitments to reform its farm-subsidy system, or cuts to the few high tariffs it retains on industrial goods.

“Deadlock after deadlock have eroded trust between some of the key negotiators, especially the U.S. and India. Fresh U.S. leadership means a chance to re-engage with India after its own general elections in the spring and build the necessary trust and compromise on safeguards for farm trade that will unblock the negotiations. The U.S. will also be in a strong position to re-energize negotiations on industrial-goods trade in a way that meets the needs of U.S. manufacturers while keeping big players like China, Brazil and India at the table.”

Mr. Mandelson also pointed out that, “It’s easy to be cynical about the Doha negotiations: too long, too slow, too squeezed of ambition by the complex compromises required to keep 153 World Trade Organization members at the same table. But Doha is still the most ambitious trade deal ever negotiated at the global level, and it still includes much deeper tariff cuts and greater farm-trade reform than any previous WTO deal. The additional reforms to the world trade rule book that will come with the final deal have huge value. It is unequivocally worth having — especially now.

“For that reason, negotiating texts that capture the progress made in 2008 must be protected from any attempt to unpick their delicate balance. WTO members should target the window between this spring and the handover to a new EU negotiator in the autumn as the best short-term hope for a deal. The G-20 should recommit their negotiators to a deal and give them the latitude to land it. And crucially, the Doha file must find its way to the top of President Obama’s in-tray.”

Keith Good

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