February 27, 2020

Secretary Vilsack; Trade Issues; and the Agricultural Economy

Secretary Vilsack

DTN Political Correspondent Jerry Hagstrom reported earlier this week (link requires subscription) that, “Agriculture Secretary Tom Vilsack told the National Cotton Council Monday he does not plan to change the farm subsidy payment limitation regulations the Bush administration wrote for 2009, and even though the Obama administration is reviewing the regulations, Vilsack declined to promise there would be changes for 2010 and beyond that the cotton growers would like to see.

“Farm groups such as the National Cotton Council are lamenting the notion that USDA is changing the rules from last year based on the farm bill, but potentially could make more changes to the payment rules next year as well. This would mean farmers would have to meet different sets of rules for 2008, 2009 and possibly 2010 and beyond. Further, some groups feel rule changes implemented by the Bush administration were tighter than necessary to comply with language in the farm bill.

Vilsack’s statements led new NCC Chairman Joe Hardwick, a Newellton, La., cotton grower, to call on Congress to pass a bill to force Vilsack to use the old 2008 regulations for this year and write new regulations to begin in 2010. Payment limits are an issue for all large farmers, but especially for cotton growers.”

The DTN article explained that, “The 2008 farm bill included provisions to tighten income limits on who can qualify for farm subsidies and who is considered ‘actively engaged’ in farming and therefore eligible for subsidies. Commodity groups, including the cotton producers, and a bipartisan coalition of 23 senators have said that the Bush administration went beyond congressional intent and wrote a rule that is too strict and will disrupt businesses. Small-farm groups and some other legislators contend that subsidies to big growers have helped them expand and gobble up small farms, and these groups say the Bush rule is not strict enough.

“When President Barack Obama took office, the payment limits rule was included in a group of rules that the White House chief of staff said the administration would review.”

The article added that, “Hardwick said in an interview Monday that if Vilsack won’t make any changes this year, Congress should put a ‘moratorium’ on the regulations for 2009. Hardwick said it would be a hardship for farmers to rewrite their business plans and reach agreements with landlords under three different sets of regulations in three years. Vilsack has previously said that changing the rule in 2009 would be impractical because farmers are supposed to sign up for the program by June 1. Farm-group leaders have privately said he should just use the 2008 regulations for 2009.

Vilsack also told the cotton growers USDA should reformulate the farm program to make climate-change issues a component to factor in for farmers to justify receiving government payments in the coming years.”

Forrest Laws, writing yesterday at the Delta Farm Press Online, also reported on recent comments made by Secretary Vilsack regarding climate change and “green payments.”

Mr. Laws indicated that, “Agriculture Secretary Tom Vilsack says the government must begin to look at new ways to support farmers — including the use of ‘green payments’ — because of the impact of the recently passed economic stimulus package on the federal deficit.

“Vilsack, the former two-term governor of Iowa who became secretary on Jan. 21, said producers must begin to think creatively and innovatively about how they can use their land to absorb carbon, how they can structure a financial market for the use of their land and provide additional support for everyone who farms.”

Yesterday’s article pointed out that, “[Sec. Vilsack] also seemed to be echoing some of the comments by environmental groups and Senate Agriculture Committee Chairman Tom Harkin, his chief sponsor for the secretary’s position, during the 2008 farm bill debate.

“Those groups and Harkin have argued that traditional farm program payments should be dismantled and replaced with ‘greener’ conservation program payments that would reward producers for reducing the carbon footprint in the farming practices. Markets for trading ‘carbon credits’ have already sprung up in some areas.” [See related article, “Farmers Could Earn Extra Income Without Extra Work.”]

The Delta Farm Press article indicated that, “‘With the passage of the stimulus bill and the deficits we have inherited, our government likely will have a trillion dollar deficit this year and maybe next year,’ [Sec. Vilsack] noted, ‘We can’t continue to sustain trillion dollar deficits, so we will face some tough decisions in the future.’

“One of those will be how agriculture deals with climate change. ‘I strongly believe that as people get to know what we can do in terms of reducing the carbon footprint of farming and create carbon sinks for the use of fields, we can create a system of green payments that will help support those small farms, mid-size farms and those large production operations.’

“Vilsack’s comments received a lukewarm response from cotton producers, who have long fought for the more traditional price support programs contained in the farm bills. ‘I just don’t see how that can help me on my farm,’ said a producer from the Southwest.”

In addition, an audio segment posted at the National Association of Wheat Growers (NAWG) Online entitled, “Comments From Secretary of Agriculture Tom Vilsack to the Board of NAWG and U.S. Wheat Associates, Feb. 9, 2009,” Sec. Vilsack commented on the future of direct payments and climate change. To listen to a brief clip of his remarks on this issue, just click here (MP3- three minutes).

To hear Sec. Vilsack’s remarks in their entirety, just click here.

In a related article regarding federal action and climate change, John M. Broder reported in today’s New York Times that, “The Environmental Protection Agency is expected to act for the first time to regulate carbon dioxide and other greenhouse gases that scientists blame for the warming of the planet, according to top Obama administration officials.

“The decision, which most likely would play out in stages over a period of months, would have a profound impact on transportation, manufacturing costs and how utilities generate power. It could accelerate the progress of energy and climate change legislation in Congress and form a basis for the United States’ negotiating position at United Nations climate talks set for December in Copenhagen.”

Today’s Times article added that, “If the environmental agency determines that carbon dioxide is a dangerous pollutant to be regulated under the Clean Air Act, it would set off one of the most extensive regulatory rule makings in history. [Lisa P. Jackson, the new E.P.A. administrator] knows that she would be stepping into a minefield of Congressional and industry opposition and said that she was trying to devise a program that allayed these worries.”

In other farm related environmental developments, an updated posted earlier this week at Ducks Unlimited Online stated that, “This past weekend symbolized a missed opportunity for waterfowl, wildlife and taxpayers when the deadline to opt in to Sodsaver passed. Governors of North Dakota, South Dakota, Montana, Minnesota and Iowa declined to participate in the provision of the 2008 Farm Bill, which would remove incentives to cultivate native prairie.

“‘Native prairie is one of our most fragile ecosystems, and we need to ensure that it is not lost forever,’ said Don Young, executive vice president of Ducks Unlimited. ‘While we are disappointed that this opportunity to promote healthy land stewardship has passed, we are hopeful that this can be the beginning of a new discussion about protecting our last remaining native prairie habitats.’”

The update explained that, “Ducks Unlimited and many other groups strongly supported a Sodsaver program that was national in scope during the debate of the 2008 Farm Bill. While grassland conversion is a nationwide problem and nationwide proposals were considered, the final provision was limited to the Prairie Pothole portion of the five states.”

Trade Issues

The Associated Press reported yesterday that, “The Obama administration is calling for stricter labels on fresh meat and other foods that would show more clearly where an animal or food came from.

“The move comes as Obama prepares to visit Canada– a longtime opponent of the so-called ‘country of origin’ labels- on Thursday. Both Canada and Mexico have protested the labeling in a complaint to the World Trade Organization.

“Agriculture Secretary Tom Vilsack told consumer groups, farm groups and meat industry leaders Tuesday that he will ask the meat industry to voluntarily follow stricter guidelines for new package labels designed to specify a food’s country of origin. The Agriculture Department abruptly canceled a scheduled announcement of the decision Wednesday morning, with little explanation.”

Joseph Morton, writing today at the Omaha World-Herald Online, reported that, “Vilsack had intended Wednesday to roll out a plan tightening recently drafted federal food labeling rules on meats, nuts and produce.

“That’s a touchy subject in Canada, which filed a complaint over the labeling rules last year with the World Trade Organization. The Canadian government complained at the time that the rules created ‘undue trade restrictions to the detriment of Canadian exporters.’

“Canada later backed off because the George W. Bush administration indicated that it would allow meatpackers some latitude on the rules. If Vilsack eliminates that flexibility, it could prompt Canada to pursue its case with the WTO.”

Mr. Morton added that, “Critics say the rules, which go into full effect next month, now tilt too far in favor of industry. Vilsack plans to ask the meatpacking industry to voluntarily follow stricter requirements. If meatpackers refuse, he intends to make the rules mandatory.

“On Wednesday, Vilsack was set to release a letter to the meatpackers and issue a press release, laying out the specifics of his plan. That was canceled at the last minute, however, and U.S. Department of Agriculture officials would say only that the letter was still being worked on.”

In a related article, Sheryl Gay Stolberg reported in today’s New York Times that, “As a candidate, Barack Obama courted votes in the Rust Belt by suggesting he might renegotiate the North American Free Trade Agreement, a pact he criticized as not ‘good for America.’

“Now Mr. Obama is about to make his first foreign trip as president to Canada, the United States’ largest trading partner — and he is sounding a strikingly different message.”

The Times article noted that, “With Canadians up in arms over ‘Buy America’ provisions in President Obama’s economic recovery package, and Prime Minister Stephen Harper warning the United States not to back away from its international treaty obligations, Mr. Obama, who will make a day trip to Ottawa on Thursday, is no longer emphasizing the idea of reopening Nafta.

“Instead, he and his senior advisers are talking up the booming trade relationship between Canada and the United States — the largest trade partnership in the world, the White House says — and limiting their Nafta message to revamping side agreements on environmental and labor protections.”

Meanwhile, in news regarding the Doha round of WTO trade talks, Bridges Weekly News Trade Digest reported yesterday that, “The chair of the WTO agriculture negotiations has announced he plans to continue his recent series of consultations with negotiating groups, in a bid to restart the faltering Doha farm trade talks. But Members remain cautious about how much progress can be achieved in the absence of a new US Trade Representative, whose nomination has still to be confirmed by Congress.

“The chair, Ambassador Crawford Falconer, told a 12 February meeting open to all Members that he planned to convene ‘carousel’ meetings to explore perceptions of the overall ‘balance’ in his draft text, released in December 2008. These consultations – which the chair also dubbed ‘hub and spokes’ meetings – would involve him speaking with each of the main negotiating groups in turn, and with some individual delegations such as the EU.”

DTN Political Correspondent Jerry Hagstrom reported yesterday (link requires subscription) that, “World Trade Organization Doha round agriculture talks will not begin in earnest until President Barack Obama has appointed a trade team, according to USDA Chief Economist Joe Glauber, who was the agriculture negotiator in the latter part of the Bush administration.

“Asked at the National Cotton Council meeting last weekend about WTO Agriculture Negotiations Chairman Crawford Falconer’s decision last week to begin Doha Round consultations with representatives of member countries and coalitions, Glauber said, ‘[World Trade Organization Director General Pascal] Lamy and Falconer realize you don’t just start having meetings. This is going to take time.’”

Yesterday’s DTN article noted that, “Glauber said he expects negotiations to resume based on the agreement negotiators reached last July before talks broke down when India and China insisted on measures that U.S. negotiators said could have led to a reduction rather than an increase in U.S. agricultural exports. That agreement would require a dramatic cut in U.S. farm subsidies, and many farm groups have objected to it.

“But Glauber said, ‘There are, in fact, things that are positive for U.S. producers, other things the U.S. has problems with,’ in that agreement.”

Agricultural Economy

Neil Irwin and Annys Shin reported in today’s Washington Post that, “It could take years for the nation to fully bounce back from the recession, according to new projections by leaders of the Federal Reserve, who indicated that even once the economy starts expanding again, it will be an ‘unusually gradual and prolonged’ recovery.

“The unemployment rate will remain elevated through at least 2011, according to the policymakers’ official forecast, released yesterday, and the economy this year could shrink by 1.3 percent. That would mark the sharpest contraction in 27 years.”

The U.S. macro-economy and current global economic conditions continue to impact the market price of some agricultural commodities.

Bloomberg writer Jeff Wilson reported yesterday that, “Soybeans fell to the lowest price in eight weeks on speculation that the slumping global economy will slash demand for food, livestock feed and biofuel. Corn was unchanged as farmers withheld supplies from last year’s crop.”

The Bloomberg article noted that, “Soybeans also fell and corn erased earlier gains on speculation that demand for livestock feed will decline. Yesterday, hog futures plunged the most in almost a year after Smithfield Foods Inc., the world’s largest pork processor, said it plans to close six plants.”

And Bloomberg writer Whitney McFerron reported yesterday that, “Cattle futures fell for a fifth straight session on speculation that U.S. demand is shrinking as the economy slumps. Hogs also declined.”

And in the dairy sector, Reed Fujii reported yesterday at The Record Online (Stockton, Calif.) that, “Low milk prices will trigger a federal program to help offset dairy farmers’ losses.

“That help will be muted, however, particularly for California dairies, which lead the nation in milk output. A cap limits payouts to larger operations, and new rules will delay payments.

“Also because of low milk prices, hundreds of thousands of U.S. dairy cows are headed to slaughter, industry officials report.”

Yesterday’s article indicated that, “Low prices mean farmers, in many cases, are receiving only about half of what it cost to produce milk. That’s a problem in San Joaquin County, where milk is the leading farm commodity, worth an estimated $466 million to farmers in 2007.

“This month, it triggered the U.S. Milk Income Loss Contract, the first time the program was active since mid-2008, said Larry Plumb, a price support conservation specialist at the Farm Service Agency in Davis.

“‘The dairy industry has taken a real difficult turn right now,’ he said Tuesday.

“Farmers who once might have received milk loss payments in March, however, will now have to wait until April, Plumb said. The 2008 Farm Bill required federal estimates of feed cost estimates be factored into the payment rate, causing the additional delay.”

An audio item from USDA’s Radio Newsline yesterday, which featured comments from World Agricultural Outlook Board Chair Gerry Bange, noted that, “Building supply and lowered demand here and abroad is sending dairy prices in all categories towards price support triggers.” To listen to this audio clip, which lasts about one minute, just click here (MP3).

Keith Good

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