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Trade Issues; Crop Insurance; Policy Issues; and Climate Change

Brazil Cotton Case

Noel E. Oman reported earlier this week at the Arkansas Democrat Gazette Online that, “To some, the United States didn’t have much leeway when it reached an interim solution last month with Brazil in a long-running dispute over American government subsidies to U.S. cotton growers.

“‘We had a limited number of things we could do,’ said Rose Marie Watkins, director of the international policy team for the American Farm Bureau Federation. ‘There wasn’t a lot of choice.’ The World Trade Organization ruled last August that the subsidies violated global fair-trade rules and decided to allow Brazil to impose import tariffs valued at $820 million on American goods and intellectual properties. After that ruling, Brazil and the United States negotiated a $147.3 million temporary solution until Congress can address the larger issue of American farm subsidies in the 2012 farm bill.

“The solution, announced April 6, calls for the United States to provide Brazil with $147.3 million per year to provide ‘technical assistance and capacity building’ for Brazilian cotton farmers.”

The article noted that, “Last month, U.S. Sens. Blanche Lincoln, D-Ark., chairman of the Senate Agriculture Committee, and Saxby Chambliss, R-Ga., the committee’s ranking minority member, issued a joint statement welcoming the agreement.”

The Democrat Gazette article added that, “On Tuesday, in an interview from the campaign trail, (she faces Lt. Gov. Bill Halter in the June 8 runoff election), Lincoln disputed the notion that the payments to Brazil amounted to a U.S. subsidy to that country’s cotton farmers. Lincoln likened the assistance to the extension services and training that the United States and other developed nations have long provided to developing nations, noting that African nations could also benefit. ‘They [the African nations are] eligible for some of the resources as well,’ she said.

“Lincoln stressed that the agreement is a ‘temporary bridge’ until Congress takes up debate on the 2012 farm bill and that it ‘delayed or postponed any retaliation, which would’ve hurt the two countries’ economies.’ ‘Instead of getting into a shouting match, we sat down … and worked out an agreement,’ she said.”

Ms. Oman pointed out that, “Steven Bipes, executive director of the Brazil-U.S. Business Council, said in a statement that it remained ‘crucial’ that businesses continue to press for a full resolution to the dispute, ‘permanently avoiding harm to U.S. companies and jobs related to this case.’ However, [Indiana GOP Senator Richard Lugar] believes that other action should have been taken in regard to agriculture subsidies such as replacing them with an income insurance program, which would protect American farmers yet be less costly, said Andy Fisher, a Lugar spokesman.

“During the debate over the 2008 farm bill, Lugar ‘warned that this was going to happen, that retaliation would result,’ Fisher said of the WTO sanctions.”

Recall that last Friday, the Wall Street Journal editorial board published an opinion item on the WTO Brazil cotton dispute, which noted in part that, “U.S. cotton farmers took in almost $2.3 billion dollars in government subsidies in 2009, and the top 10% of the recipients got 70% of the cash. Now Uncle Sam is getting ready to ask taxpayers to foot the bill for another $147.3 million a year for a new round of cotton payments, this time to Brazilian growers.”

Earlier this week, the National Cotton Council (NCC) issued a response to the Journal editorial.

In part, the NCC stated that, “With their first sentence, the WSJ does not waste any time in presenting only part of the story. They are quick to point out the high level of government payments in 2009 without clarifying that the payments were elevated because of low prices stemming from the sharp decline in cotton demand due to the global recession. They also fail to note that the WTO found no fault with direct payments and crop insurance, which are included in the total payments cited in the editorial. The WSJ editors further decline to inform the reader that current spending on the price-based provisions involved in the dispute (i.e. the marketing loan and counter-cyclical program) likely will be zero for the 2010 crop.”

The WTO did not rule that cotton programs under the current 2008 farm bill violate U.S. trade commitments. No, a WTO panel ruled that selected provisions of the cotton program from the 2002 farm bill along with the export credit guarantee programs for essentially all commodities were either causing significant price suppression or were prohibited subsidies.”

The NCC response added that, “In 2006, after the first WTO Panel’s ruling, Congress terminated the ‘step 2’ cotton program, a part of the program that was found to be an export subsidy. Congress also made further adjustments in the 2008 farm bill, reducing target prices slightly and making adjustments in the loan program. The biggest adjustments, however, have been made by U.S. cotton farmers on their own. The U.S. industry has decreased cotton production to the point that the United States is not remotely a threat to any cotton exporting countries.”

Doha Development Round

Meanwhile, Reuters writer Jonathan Lynn reported yesterday that, “Ministers from major trading powers decided on Thursday to redouble efforts for a deal in the stalled Doha round, arguing that opening up global trade would boost the world economy without hitting budgets.

They acknowledged the 8-1/2-year-old Doha round was at an impasse and that serious negotiations — away from the glare of the media and public diplomacy — were now needed to break the deadlock.

“Australian Trade Minister Simon Crean said ministers meeting in Paris had held frank discussions about the difficulties they faced.”

The article stated that, “The outlines of a deal are clear: rich countries will remove barriers to their food markets and cut trade-distorting farm subsidies while developing countries, except the poorest, open their markets to more goods and services.

“But agreeing an overall package has proven impossible so far, with the United States arguing that big emerging economies such as Brazil, China and India — who are now major players in the global economy — should do more to facilitate a deal.”

“[U.S. Trade Representative Ron Kirk] categorically rejected the idea that the United States should make a ‘pre-payment’ to get those negotiations moving, pointing to concessions already made by the U.S. in agriculture,” the article said.

U.S. Ag Exports

As global agricultural trade issues continue to be debated, USDA indicated yesterday that U.S. agricultural exports are surging.

An “Outlook for U.S. Agricultural Trade Report” released yesterday stated that, “Fiscal 2010 agricultural exports are forecast at $104.5 billion, up $4.5 billion from the February forecast and $7.9 billion above final FY 2009 exports. Strong oilseed and grain shipments support the overall export forecast.”

USDA Chief Economist Joe Glauber provided brief comments on the latest trade numbers in a Daily Radio News item from USDA yesterday (one-minute audio available here); while Sec. of Ag. Tom Vilsack indicated a statement yesterday that, “Today’s strong economic report is good news for communities across the country, not only because of the increasing opportunities for America’s farmers and ranchers to sell their products overseas, but also because of the importance of agricultural exports to the American economy. With each $1 billion in exports supporting 8,000 to 9,000 jobs at home, efforts to increase trade are an important part of the Administration’s effort to strengthen our economy here at home.”

Reuters news reported yesterday (article posted at DTN, link requires subscription) that, “A global hunger for beef has been good news for the U.S. beef industry, which year-to-date has exported 25 percent more beef than in 2009 and the largest amount since 2003 when mad cow disease had countries briefly banning the meat.

“Japan, Mexico, South Korea, Russia and others have bought huge amounts, which analysts said is a key reason beef and cattle prices are at their highest since 2008.

“Export business should remain strong this year as improving global economies have overseas consumers adding beef to diets, economists said. Also, a weak U.S. dollar and declines in beef exports from Australia and South America should help.”

Also with respect beef trade issues, a news release issued yesterday by GOP Sen. Mike Johanns (Neb.) stated that, “Senator Mike Johanns (R-Neb.), along with Senate Finance Committee Chairman Max Baucus (D-Mont.) and Senate Agriculture Committee Chairman Blanche Lincoln (D-Ark.) introduced a Senate Resolution today urging China, Japan, South Korea, Hong Kong, Taiwan, Mexico and Vietnam to follow international guidelines and provide full market access to all U.S. beef products. Today’s resolution is part of the Senators’ longstanding fight to open foreign markets for American ranchers and farmers to sell their world class products.

“‘The United States leads the way in following internationally recognized, science-based standards and treats its trading partners fairly,’ Johanns said. ‘We’ve been beyond patient in waiting for fair treatment in return. American beef and beef products have been scientifically proven to be safe for consumption; there is absolutely no justification for banning U.S. beef. It is well past time for these countries to live up to their end of our good-faith trade agreements.’”

With respect to corn exports, Reuters news reported yesterday (via DTN, link requires subscription) that, “China is forecast to buy a record $14.0 billion in U.S. farm goods in 2010, up 20 percent from the previous forecast, making it the third-largest export market for American farmers behind Canada and Mexico, the U.S. Agriculture Department said on Thursday.”

And in trade developments regarding poultry, William Mauldin reported today at The Wall Street Journal Online that, “Russia said Thursday it has worked out a plan that would allow for the resumption of U.S. poultry exports to Russia, halted since January.

The U.S. expressed hope that exports to Russia would resume soon but said the two sides are still working on the issue, a key stumbling block in Russia’s accession to the World Trade Organization.”

Crop Insurance

A news release issued yesterday by the Crop Insurance Professionals Association (CIPA) stated that, “In a Tuesday letter to U.S. farm organizations, crop insurance agents released an alternative to the massive crop insurance funding cuts— ranging from $8.4 to $6.9 billion—recently proposed by the U.S. Department of Agriculture.

“‘What has been missing from this negotiation is a focus on what benefits the farmer,’ said Ronnie Holt, Chairman of the Crop Insurance Professionals Association (CIPA), the group of independent agents that wrote the letter.

“‘If the government wants to shrink crop insurance costs or restrain company profits, then the USDA should consider lowering the premiums that farmers pay,’ he explained. The USDA, not crop insurance companies, set these rates.”

The release added that, “‘The effect of such a step would be to lower producer premiums while also lowering government costs,’ Holt continued. ‘This is a straightforward means of achieving savings in delivery costs while helping the producer—the proverbial win-win-win for farmers, taxpayers, and the program.’

“The USDA and crop insurers are currently negotiating the contract, or Standard Reinsurance Agreement (SRA), that will dictate the crop insurance program for the next five years. These negotiations have solely focused on cuts to insurers, which could harm future insurance offerings.”

Dairy

Bloomberg writer Jeff Wilson reported yesterday that, “U.S. dairy farmers plan another round of herd reductions in a bid to bolster milk prices, according to the National Milk Producers Federation.

“The number of animals targeted for slaughter wasn’t specified. In the nine previous culls since the summer of 2003, more than 480,000 dairy cows were sent to processors, a federation official said. The cull announced today will be the first since the fall of 2009.”

The article explained that, “Under the federation’s program, dairy farmers whose herds are accepted for the cull would be reimbursed for lost milk production at prices set through bidding. Producer bids up to $3.75 for 100 pounds of milk output will be considered, down from $5.25 in the last retirement program. Farmers have until June 25 to submit bids.

“The program, called Cooperatives Working Together, is funded by assessments on the federation’s members’ milk production.”

And Bloomberg writer Alison Fitzgerald reported yesterday that, “These are tough times for America’s 60,000-odd dairy farms, thanks to a decade-long deflationary trend in prices and a particularly severe downturn last year, Bloomberg Businessweek reports in its May 31 issue. Industry sales fell 30 percent in 2009, to $24.1 billion, from the year-earlier period, according to the Agriculture Department.

“Congress, which spent $350 million on emergency dairy price supports last year, has taken notice. So has the Justice Department, which is scrutinizing the market power of the biggest dairy cooperatives and food companies to assess the effect on prices.

Along with the USDA, Justice Department officials will hold a June 25 hearing in Madison, Wisconsin, on dairy market concentration. Meanwhile, the Commodity Futures Trading Commission is reviewing complaints of price manipulation in the spot cash market for cheddar cheese, which also affects the price of milk.”

Yesterday’s article stated that, “Two big players, Dallas-based Dean Foods Co. and the Dairy Farmers of America, a cooperative out of Kansas City, Missouri, are the target of pending federal class actions, one filed in 2008, the other in January, in which they are accused of colluding to control market access and suppress milk prices.”

“Assistant Attorney General Christine Varney, head of the Justice Department’s antitrust division, said last year, ‘We are very cognizant of the allegations at issue here.’”

EPA Issues

A news release from yesterday by Rep. Candice Miller (R-Michigan) stated that, “U.S. Congresswoman Candice Miller (MI-10) today introduced legislation to direct the Environment Protection Agency (EPA) to change their designation of milk as an environmental hazard. Congresswoman Miller’s legislation will prohibit enforcement of the EPA’s regulations on dairy and dairy product producers, processors, handlers and distributers, and it would require the EPA to implement this exemption within 30 days of the legislations enactment. Currently under the Clean Water Act, the EPA instituted a program called the Oil Spill Prevention, Control and Countermeasure Program which directs producers to have an oil spill prevention plan (SPCC plan), because under this rule milk is considered the same as oil, and if dairy producers do not comply with the EPA’s rule then they will be subject to punitive damages.”

Meanwhile, news release issued on Wednesday by the Natural Resources Defense Council stated that, “The Environmental Protection Agency will launch a regulatory initiative to identify and investigate thousands of factory farms that have been avoiding government regulation for animal waste pollution, according to a settlement reached last night on a lawsuit filed by environmental groups over a Bush administration water pollution regulation.

“‘Thousands of factory farm polluters threaten America’s water with animal waste, bacteria, viruses and parasites that can make people sick,’ said NRDC senior attorney Jon Devine. ‘Many of these massive facilities are flying completely under the radar; EPA doesn’t even know where they are. Our lawsuit and today’s settlement rejects industry’s self-policing practices and requires EPA to start gathering the missing information it needs to clean up our waterways and protect public health.’”

Yesterday, the National Pork Producers Council issued a release regarding this development, which stated that, “The National Pork Producers Council today expressed deep frustration and anger over the U.S. Environmental Protection Agency’s continuing efforts to develop costly agricultural regulations that provide few if any additional environmental benefits.

“EPA Tuesday reached a settlement with several environmental groups on a lawsuit that challenges Clean Water Act permitting regulations for concentrated animal feeding operations (CAFOs). NPPC is part of that ongoing litigation. The CAFO Rule, which was issued Oct. 31, 2008, sets a zero-discharge standard for manure from CAFOs getting into waterways and imposes penalties – $37,500 a day – on operations that do have discharges.”

“‘This agreement sets the stage for new Clean Water Act permitting measures that will add to producers’ costs, drive more farmers out of business, increase concentration in livestock production to comply and hurt rural economies,’ said Randy Spronk, a Minnesota pork producer who heads NPPC’s environmental committee. ‘And the measures will do nothing really to improve water quality.’”

Food Safety

A news release issued yesterday by Sen. Ag. Committee Chairman Blanche Lincoln (D-Ark.) stated that, “U.S. Senator Blanche Lincoln, D-Ark., today said in light of recent food safety incidents, the United States Department of Agriculture’s (USDA) duty to maintain the safety of our nation’s food supply is more critical than ever. Lincoln’s comments came while chairing a Senate Agriculture Committee hearing to consider the nomination of Dr. Elizabeth Hagan for USDA Under Secretary for Food Safety. Four additional nominations were also considered by the committee.

“‘USDA has perhaps no more important mission than maintaining the safety of our nation’s commercial food supply. In light of recent deadly food safety incidents, restoring the public’s faith in the integrity of our food systems will require increased coordination with all relevant agencies. As Chairman of the Senate Agriculture Committee, today’s nomination hearing was an opportunity to voice my concerns and ensure that Dr. Hagen shares my commitment to keeping our nation’s food supply safe,’ said Lincoln.

As part of his questions and comments at yesterday’s Senate confirmation hearing, Sen. Bob Casey (D-Penn.) asked Dr. Hagan about improving technical assistance for small meat facilities. Dr. Hagan indicated that USDA has a commitment to producers and processors of all sizes and scopes and that the Know Your Farmer Know Your Food program is all about connecting consumers with farmers that producer their food.

Dr. Hagan added that an office at USDA has as its mission, outreach to small and very small establishments, and they have recently published guidance documents on costume mobile slaughter units to allow local producers to be able to slaughter their products and get them out.

To listen to the exchange on this issue between Sen. Casey and Dr. Hagan, just click here (MP3-1:51).

Nutrition

A news release issued yesterday by Sen. Ag. Committee Chairman Blanche Lincoln (D-Ark.) stated that, “[Sen. Lincoln] and Ranking Member Saxby Chambliss, R-Ga., today sent a bipartisan letter to Senate leadership signed by 53 Senators urging that the Senate take up and pass The Healthy, Hunger-Free Kids Act of 2010. The Senate Agriculture Committee unanimously passed the bill on March 24 of this year.

“‘This letter makes clear there is strong, bipartisan Senate support to pass The Healthy, Hunger-Free Kids Act of 2010 as soon as possible,’ Lincoln said. ‘With such little time left in this session of Congress before these programs expire, and so many other competing legislative priorities, the most important thing we can do right now is keep the wheels rolling. We simply cannot afford to delay bringing this bill to the floor.’”

The release explained that, “In addition to continuing USDA’s authority to administer child nutrition programs, The Healthy, Hunger-Free Kids Act of 2010 provides $4.5 billion in new funding over the next 10 years – nearly ten times the amount of money provided for the previous child nutrition reauthorization, and the largest new investment in child nutrition programs since their inception. The legislation also includes a 6-cent increase in the federal reimbursement rate for the National School Lunch Program – the first time in nearly 40 years that Congress has taken such an action. The legislation is fully paid for.”

Climate Change

A news release issued yesterday by the National Farmers Union stated that, “The National Farmers Union (NFU) joined other agricultural organizations in submitting a letter to Environmental Protection Agency (EPA) Administrator Lisa Jackson and U.S. Department of Agriculture (USDA) Secretary Tom Vilsack expressing the importance of accurately assessing the implications of policies to control greenhouse gases and develop carbon offset markets.

“‘We are writing to request your assistance in ensuring that future assessments of an offset market accurately represent the policies being proposed, particularly for modeling of the energy and climate legislation recently proposed by Sens. Kerry and Lieberman,’ the group wrote in the letter.

“Congress requires that modeling and analysis be completed before it can continue debate on climate legislation. NFU encourages the agencies to provide economic projections that take into account the full range of offsets that are intended by the proposed legislation and available for use in a carbon market.”

Keith Good