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Vilsack Hearing, and FAPRI Report (Food Prices)

Vilsack Hearing

Andrew Martin reported in today’s New York Times that, “Former Gov. Tom Vilsack of Iowa said that if he is confirmed as President-elect Barack Obama’s agriculture secretary, he would aggressively pursue new fuel sources to produce ethanol, promote locally grown fruits and vegetables and look for other ways to increase farmers’ incomes, in areas like wind power and organic farming.

“But while Mr. Vilsack acknowledged the current struggles of the corn-based ethanol industry — with Iowa at the center — he stopped short of endorsing new federal initiatives to give it a boost.

“Mr. Vilsack also said any research promoting new types of biofuels needed to benefit more than just the Corn Belt.”

Mr. Martin added that, “If the members of the Senate agriculture committee were surprised or disappointed by Mr. Vilsack’s answers, they did not show it. Mr. Vilsack sailed through the confirmation hearing with nary a word of criticism, and Chairman Tom Harkin, Democrat of Iowa, said he expected Mr. Vilsack to be confirmed unanimously Tuesday.”

“His confirmation hearing comes as the farm economy is struggling after years of soaring prices fed by growing demand for exports and ethanol. And demand for federal nutrition programs is increasing as the recession deepens,” the Times article said.

Philip Brasher reported yesterday at The Des Moines Register Online that, “Vilsack warned the senators that the ethanol industry faces a rough period for several years. Ethanol producers have been squeezed by falling prices and softening demand for the fuel.

“‘The margins are very, very small, and frankly you are going to have to be a very efficient manager over the next few years to do well,’ Vilsack said.”

The Register article indicated that, “The Obama administration wants to accelerate the development of new versions of biofuels made form crop residue and non-food crops such as switchgrass. The plants’ fibrous material, or cellulose, can be converted into alcohols or even new versions of gasoline or diesel.

“‘Moving toward next-generation biofuels, cellulosic ethanol, is going to be really important in order to respond’ to concerns about the impact on food prices of using grain for fuel, he said.”

Bloomberg writer Alan Bjerga reported yesterday that, “Former Iowa Governor Tom Vilsack told the Senate Agriculture Committee he would push for greater production of alternative energy, should he be confirmed as the nation’s 30th secretary of agriculture.

“Vilsack said he realized the ethanol industry is currently ‘in some difficulty’ and undergoing some consolidation, with even the best producers being challenged by small profit margins.

“‘But it important to maintain the infrastructure’ of plants to ensure further growth in ethanol based on corn and other materials, he said at a committee nomination hearing today in Washington. ‘You don’t want the billions of dollars already invested to not materialize.’”

Mr. Bjerga noted that, “Vilsack said protecting the nation’s food supply, quickly implementing the $289 billion 2008 farm bill and improving soil and water conservation would also be among his priorities.”

Reuters writer Charles Abbott reported yesterday that, “At several points, Vilsack said he would use Agriculture Department programs to encourage production of biofuels and to bring to market new feedstocks. Corn-based ethanol is currently the dominant biofuel in the United States. Cellulose, found in grasses and wood, is being developed as the next major alternative fuel source.”

Mr. Abbott explained that, “Under a 2008 law, USDA can offer loan guarantees for plants producing new-generation fuels, help plants expand output and share the cost with farmers who experiment with biomass crops. USDA also can support research on biofuels.”

Chris Clayton reported yesterday at the DTN Ag Policy Blog that, “Southern lawmakers from Ranking Member Saxby Chambliss, R-Ga., to Sen. Blanche Lincoln, D-Ark., and Sen. Thad Cochran, R-Miss., stressed to Vilsack that he needs to understand he represents all of agriculture. To that end, these senators emphasized that USDA right now has gone too far in writing rules for the farm bill that will adversely affect southern agriculture. Lincoln said USDA’s rules are ‘completely out of the ballpark from what our intent was.’

“Vilsack said he would consult with the committee over issues of implementing the farm bill. Vilsack specifically highlighted his enthusiasm for implementing changes in the Conservation Stewardship Program in the bill, as well as completing rules for the permanent disaster program.

“‘I know that it is important to members of Congress that whatever compromises were made to reflect the diversity of agriculture that are reflected in that bill be carried out,’ Vilsack said. ‘I think it’s important what we do is consistent with congressional intent.’”

Dan Looker reported yesterday at AgicultureOnline that, “On the issue of farm program payments, Vilsack said it’s important that farmers who deserve payments get them and those people who don’t deserve payments under the law should not. He said the USDA needs a better data base on program payments, ‘for us to learn from that data whether we need changes.’”

AP writer Mary Clare Jalonick reported yesterday that, “Despite problems in rural communities, the agricultural sector has fared better than many industries in recent years as the demand for renewable fuels has helped fuel record crop prices. But those prices have dropped in recent months.

“‘All of these are serious challenges that require a compelling new vision for the department,’ Vilsack said.”

The AP article noted that, “One of Vilsack’s first priorities as secretary would likely be putting a $290 billion farm bill, enacted last year, into place. President George W. Bush, backed by fiscal conservatives, said the bill was wasteful and too costly. He vetoed the bill but Congress, with Obama’s support, overrode the veto.”

[FarmPollicy Note: A related Wall Street Journal editorial on President-elect Obama’s support for the Farm Bill is available here.]

“Vilsack has been a champion of corn-based ethanol, a central part of his short-lived campaign for president in two years ago, and endorsed tax breaks for the ethanol industry. Renewable fuels policy, along with subsidies for that industry, is expected to be a top issue for the incoming secretary,” the AP article said.

DTN Political Correspondent Jerry Hagstrom reported yesterday (“Nutrition Focus Could Ignite Battle Among Farm Lobbyists”- link requires subscription) that, “Former Iowa Gov. Tom Vilsack, President-elect Obama’s nominee for agriculture secretary, pledged at his confirmation hearing Wednesday that he has agreed to work with Health and Human Services Secretary-designate Tom Daschle on making better nutrition a key element in health care reform. This is likely to be good news for the fruit and vegetable industry but a problem for the rest of agriculture.”

Mr. Hagstrom indicated that, “A strong government push to change U.S. eating habits would be good news for the fruit and vegetable industry. It could, however, set off bitter lobbying battles among farm groups because government purchases of meat and dairy products would likely go down under such a plan.

“Harkin noted at the hearing that the child nutrition programs expire in 2009 and that reauthorization of them is ‘the only thing’ the Agriculture Committees must do this year.”

In a related item, a news update posted yesterday at the California Farm Bureau webpage stated that, “They worked hard to insure that the new federal farm bill included approximately $3 billion committed to fruits, vegetables, nuts and other ‘specialty crops.’ Now, specialty crop growers and the groups that represent them are following up to make sure the money goes to the programs included in the Food, Conservation and Energy Act of 2008.

“‘The farm bill holds great hope for the fresh fruit and vegetable industry, but our job is far from over. Just because we got the bill passed doesn’t mean we still don’t have a lot of work to do,’ said Barry Bedwell, president of the California Grape & Tree Fruit League. ‘We now must follow up with an efficient implementation of these provisions and we always have to be aware that there is somebody on the sidelines wanting to lower those amounts.’

“Bedwell’s commodity organization, which represents growers and shippers of table grapes and fresh deciduous tree fruit, is one of 120 specialty crop organizations from California and around the country that joined to form a national coalition known as the Specialty Crop Farm Bill Alliance. Following more than a year in developing consensus on initiatives in the farm bill that improve the competitiveness of producers, the coalition was satisfied that the 2008 Farm Bill was the first to contain a new title for specialty crops.”

Agriculture Committee Chairman Tom Harkin’s opening statement from yesterday’s hearing is available here, and a news release regarding yesterday’s Committee activity from Ranking Member Saxby Chambliss can be found here. An audio reply of yesterday’s hearing is available at this Brownfield webpage.

In a related article regarding the relationship between the executive and legislative branches of government, Alexander Bolton reported yesterday at The Hill Online that, “President-elect Obama’s evident distrust in sharing with Congress sensitive information about the internal workings of his administration has begun to irk Democratic committee chairmen.

“Obama and his top advisers took pride in running a leak-free campaign for president and since the election have kept tight controls on information.”

Mr. Bolton noted that, “They are discovering, however, that in Washington, where information is a valuable commodity, it’s not considered nice to hoard.

“Ten committee chairmen in the Senate and House said that Obama’s advisers did not alert them ahead of time about the incoming president’s Cabinet selections. Nine of them learned of the picks from the media, even though the Senate committee chairmen have confirmation authority over them.”

The Hill article stated that, “Another Senate chairman, Tom Harkin (Iowa), senior Democrat on the Agriculture Committee, felt miffed because he was not told Obama would select former Iowa Gov. Tom Vilsack (D) as secretary of Agriculture.

“‘They did not contact me and I expressed being upset about it and [said] that it’s an odd way to start things off,’ said Harkin.

Harkin said that after he complained he was contacted by the Obama team and ‘things got a little bit better,’ but he declined to reveal details of his conversations.” (Note: For more background on this development see this FarmPolicy.com update from December 17).

Obama’s selection of Vilsack also shirked the advice of House Agriculture Committee Chairman Collin Peterson (Minn.), who had said publicly that he was ‘not big on governors’ serving atop the Agriculture Department.”

FAPRI Report (Food Prices)

Yesterday, the Food and Agricultural Policy Research Institute (FAPRI) released a report entitled, “Causes and Implications of the Food Price Surge.”

A FAPRI summary of the report stated that, “This paper analyzes the food price surge of 2005 to 2008 in order to better understand the factors causing higher and more volatile food prices during this period, to ascertain the relative importance and possible persistence of the different factors, and to suggest possible implications for future market behavior and policy reactions.”

On page 30 of the report, the authors noted that, “We have described a rather rapid transition from the decades-long period of falling real prices of grains and food more generally to a new market environment in which commodity and food prices are, higher, more volatile and more tightly linked to petroleum prices. Much of the market behavior seen during the past few years is linked to the growing interdependence of energy and agricultural markets. This market behavior and the conditions surrounding it are likely to continue, and the prospects of returning to the patterns of the previous decades are less likely.”

In related news, Keith Johnson noted yesterday at the Environmental Capital Blog (The Wall Street Journal) that, “Crude oil futures made a tepid run up toward $40 a barrel on Wednesday as OPEC continued to talk about cutting production. But crude quickly sank below $37 when U.S. crude inventory numbers revealed an especially gloomy picture for oil demand. Crude stocks rose to 326 million barrels, and even stocks of refined products like heating oil rose sharply—in the middle of January, not a normal time to hoard heating oil, Bloomberg noted:

“‘When you get a 6 million-barrel build in distillate during the dead of winter, you are looking at a grim demand picture,’ said John Kilduff, senior vice president of energy at MF Global Inc. in New York.’

OPEC’s frantic efforts to curtail oil supply underscore how quickly global demand has evaporated.”

Meanwhile, Bloomberg writer Jeff Wilson reported yesterday that, “Corn prices rose for the first time in three days on speculation a drought will worsen prospects for crops in Argentina. Soybeans were unchanged.”

The article stated that, “Corn futures for March delivery rose 4 cents, or 1.1 percent, to $3.665 a bushel on the Chicago Board of Trade. Earlier, the price touched $3.5875, the lowest for the most- active contract since Dec. 12. The price has dropped 54 percent from a record $7.9925 on June 27.

“Soybean futures for March delivery closed at $9.715 a bushel after rising as much as 1.9 percent. Yesterday, the price touched $9.60, the lowest this month. The commodity has dropped 41 percent from a record $16.3675 on July 3.”

Keith Good