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House Ag Committee, EU Issues, and the Ag Economy

House Ag Committee

A news release issued yesterday by the House Agriculture Committee indicated that, “Agriculture Committee Chair Collin C. Peterson of Minnesota announced the Members of Congress selected to serve on the House Agriculture Committee for the 111th Congress today.

“The House Democratic Steering Committee has nominated 28 Democrats, including 11 freshmen Members and 17 returning Members, to serve on the House Agriculture Committee. The House Republican Conference has named 17 Republicans to serve on the Committee and has left one seat vacant.”

Earlier this week on the AgriTalk Radio program, House Ag Committee Ranking Member Frank Lucas of Oklahoma spoke with Mike Adams regarding his role on the Committee; to listen to this conversation, just click here.

A news release issued by Rep. Lucas from last month noted that, “Republican leadership announced that Congressman Frank Lucas would serve as the Republican Leader of the House Committee on Agriculture for the 111th Congress. Lucas succeeds Virginia Rep. Bob Goodlatte, who was required to step down by Republican Conference rules after three terms as his party’s leader on the Agriculture Committee, serving two as Chairman.”

The release added that, “This will mark Lucas’ ninth term as a member of the House Agriculture Committee, serving on it since he was first elected in 1994. Lucas is the second Oklahoman to serve as his party’s leader of the House Agriculture Committee.”

Philip Brasher, writing yesterday at the Green Fields Blog (The Des Moines Register) pointed out that, “Iowa Rep. Leonard Boswell is becoming chairman of the House agriculture subcommittee that oversees crop subsidy programs. The Democrat had chaired the livestock committee since 2007. The general farm commodities and risk management subcommittee also oversees crop insurance and the commodity exchanges. The agriculture committee is between farm bills so its work is likely focus on overseeing implementation of the farm bill, including the startup of a new disaster assistance program and provisions cutting profits of the crop insurance industry.”

EU Issues

Dow Jones writer Matthew Dalton reported yesterday that, “The European Commission Thursday said it was moving to provide government support for dairy farmers to offset a steep drop in prices over the last six months.

“The commission will again pay refunds for exports of butter, cheese and milk powder. It will also increase its purchases of butter and skimmed powdered milk when it begins to intervene in the market in March.

“‘The severity of the fall in milk prices over recent months has surprised many,’ said Mariann Fischer Boel, the European Union’s agriculture commissioner, in a statement. ‘I have spoken to many producers during my travels to different Member States and their anxiety is clear. Now it is time for the European Union to help.’”

The Associated Press added yesterday that, “The EU stopped paying export refunds for dairy products in June 2007 when prices soared. It says it now needs to subsidize EU exporters to help them compete with rivals in the rest of the world.

“French and German dairy farmers have demanded EU help for months.”

Meanwhile, John Perkins reported yesterday at Brownfield that, “The U.S. Trade Representative’s office says it is changing tariffs on imports from the European Union as part of their effort to get the E.U. to reopen their borders to U.S. beef. In a press release, USTR head Susan Schwab stated that it was ‘time to modify the duties to try and encourage a resolution to this long standing dispute so as to finally provide a fair outcome to the U.S. beef industry, while addressing the economic impact of such long-standing duties on U.S. interests.’”

A news release issued yesterday by the European Commission countered that, “In a clear attempt to escalate the EU-US hormones dispute the outgoing US has decided to suspend the so called ‘carousel’ trade sanctions legislation and thereby allow the US to revise, every six months, the list of goods subject to sanction. It is more punitive than the current measure which imposes duties of 100% on certain products. The value of the sanctions amounts to 116.8M € on a fixed list of goods. It is clear that exporters will face increased uncertainty as their goods could be subject to tough duties at short notice. The trade implications of this measure will be significant.

“The EU Trade Commissioner Catherine Ashton said: ‘Transatlantic trade needs champions, not sanctions. This action is most regrettable in view of many attempts by the EU to find a solution to the long-standing trade dispute over hormone-treated beef. A large number of EU exporters will be hit by these illegal sanctions. We look forward to working with the new administration to address this situation.’

It is clear that this move by the US administration means that we will have no choice but to start preparations in order to take this to the WTO. A great deal of effort had been put into finding a mutually agreed settlement to this on going dispute. This task has now become mush more difficult. As the WTO has not yet taken a view on our current hormone regime dating from 2003, the US sanctions are illegal.

“The ‘carousel’ measure was due to have been referred to the WTO when it was introduced in 2000, but we held off as the US agreed to suspend it without ever implementing it. We are convinced the ‘carousel’ measure is illegal as it breaches the WTO requirement of equivalence between the damage caused by the sanction or ban and the retaliation proposed.”

Ag Economy

Dow Jones writer Rebecca Townsend reported yesterday that, “Soybean revenue assurance claims topped a record $1 billion for the first time in 2008, driven up by the nosedive crop futures prices took prior to last year’s harvest.

Corn claims also hit record levels for the year, according to the U.S. Department of Agriculture’s Risk Management Agency.”

The article added that, “Soybean revenue assurance claims were particularly egregious: At $1.073 billion, they were up more than 2.33 times over last year and 146.5% over the five-year average.

“Corn claims, which totaled $812.7 million, were also up 60% over the 2007 claim total of $493 million. The claims marked a 65% increase over the five-year average.”

The Dow Jones article indicated that, “Revenue assurance policies written for 2008 corn were insured at a base price of $5.40 a bushel, only to have the RMA’s harvest price drop 31% to $3.74. Soybean prices from base to harvest price also dropped 31%, to $9.26 from $13.36.

“Policies are written in February against a base price measuring the Chicago Board of Trade’s monthly average for November soybeans and December corn futures. Farmers with revenue assurance choose to protect 65% to 85% of that base. For corn, the harvest price is determined by averaging the CBOT price for the December corn contract during the month of November.

“The RMA offers other revenue-protection products that offer variations on coverage and price determination. Revenue assurance policies offer coverage ranging from 65% to 85%, but other policies go as low as 50% and as high as 90%.

“If farmers suffer yield loss atop dropping market prices, their claim capacity expands.”

And an extension article issued earlier this week from the University of Illinois (“Fertilizer Prices Likely to Decline in 2009,” by Gary Schnitkey) stated that, “Difficulties within the financial sector became apparent in the middle of September as the United States government grappled with responses to a worsening credit situation. The financial meltdown, along with public perceptions of economic problems, has led to concerns that a deep, world-wide recession is occurring. As a result, prices of many commodities have declined dramatically in the belief that demands for those commodities are being reduced. Among those commodities seeing declines are wholesale fertilizers. Lower wholesale fertilizer prices likely will lead to lower prices that farmers pay for fertilizers. Lower fertilizer prices then may lead to an increase in corn profitability relative to soybean profitability.”

Brian Baskin reported in today’s Wall Street Journal that, “This month’s benchmark crude futures are adhering closely to last month’s script, plunging toward a five-year low soon after topping $50 a barrel.

“This nosedive, which comes just days ahead of the expiration of the front-month contract, lacks the same punch the second time around, as the oil market adjusts to the supply glut that is driving the unprecedented price movements.

“Crude-oil futures on Thursday fell $1.88, or 5%, to $35.40 a barrel on the New York Mercantile Exchange. It is down 15% in the past week. Oil ended at $33.87 on Dec. 19, 2008, the lowest since February 2004.”

And the Associated Press reported yesterday that, “March wheat futures fell 5.5 cents to $5.6875 a bushel, while corn for March delivery dipped 1.25 cents to $3.6525 a bushel.

“March soybeans rose 23 cents to $9.9450 a bushel.”

Keith Good