January 21, 2020

Senate Farm Bill: Financing Issues Remain

Reuters news reported yesterday that, “A U.S. offer to slash its maximum farm subsidies is insufficient for a world trade deal to be reached, French Agriculture Minister Michel Barnier said in an interview published on Monday…France has repeatedly called on the United States and developing countries to make more concessions in order to salvage the Doha round of world trade talks, calling for more ‘reciprocity’ from other parties…’The European Union has no more concessions to make — it has made many.'”

I. Farm Bill
II. WTO / Doha Considerations

I. Farm Bill

Sarah Lueck reported in today’s Wall Street Journal that, “A dispute over tax changes under consideration in the Senate to fund new tax breaks for farmers shows that Congress has its work cut out meeting new pay-as-you-go budget rules.


Canada & Brazil- WTO Activity on U.S. Farm Subsidies

Lee Berthiaume, in an article posted yesterday at The Embassy Online (Canada), reported that, “Canada and Brazil are working to get a World Trade Organization dispute panel to hear their respective complaints about American agricultural subsidies at the same time.

“‘Canada’s focus is on advancing the potential alignment of the Canadian and Brazilian cases given that both countries share the same concerns and same objectives of disciplining and reducing U.S. trade distorting subsidies,’ said International Trade spokeswoman Renée David.


Farm Bill Debate

Dow Jones writer Grace Fan reported yesterday that, “Brazil is planning to join Canada in a complaint lodged at the World Trade Organization against unfair U.S. agricultural subsidies, a Brazilian Foreign Ministry spokesman told Dow Jones Newswires on Tuesday…The Foreign Ministry will release a statement tomorrow, but I can confirm that Brazil will ask for more information from the U.S. on these subsidies as a co-author with Canada,’ said the spokesman in a telephone interview…A few weeks ago, Canada formally asked the WTO to establish a dispute settlement panel, charging that the U.S. had breached WTO commitments by surpassing a $19.1 billion WTO spending limit in six out of the past eight years.”

I. Farm Bill
II. Doha / Trade

I. Farm Bill

Chris Clayton, writing yesterday at DTN (link requires subscription), reported that, “There are growing rumblings as members of Congress who don’t want to risk seeing a farm bill full of reform argue there isn’t enough time to debate a farm bill on the floor of the U.S. Senate this year, Sen. Richard Lugar, R-Ind., said Monday.

“The Senate is piling up critical issues to debate, most of which tie back to the Iraq war. Such a full plate of issues would spark at least some lawmakers to avoid an arduous debate on farm policy by pushing an extension of the current programs, Lugar said in an interview Monday.

“‘I see some inklings that this is where we are headed,’ he said.”


Commodity Title

On Tuesday, members of the House Agriculture Subcommittee on General Farm Commodities and Risk Management “voted 18-0 to base the new farm bill on an extension of current crop support rules” (Reuters).

Brownfield’s Bob Meyer reported yesterday that, “Wisconsin Congressman Ron Kind [is] among those quite disappointed by the House Ag Subcommittee decision to extend the current commodity title through the next farm bill. The group completely ignored the changes suggested by Kind’s FARM 21 plan. ‘Reform is going to occur one way or the other,’ the La Crosse Democrat says, ‘I’d rather have Congress deal with some of the reform proposals rather than have it done for us by outside entities through these challenges with the World Trade Organization.’

“Kind agrees with comments that the subcommittee decision is a starting-point; he says there is a lot of interest in seeing a strong conservation title, reform of the nutrition programs, more for biofuels production. Kind says the only way these things can be accomplished is by reforming the commodity subsidy programs, ‘I hope the Committee, I hope Chairman Peterson keep an open mind.’”

To listen to a Brownfield interview with Rep. Kind, just click here (MP3).

In the six-minute interview, Rep. Kind used a phrase that Secretary of Agriculture Mike Johanns often delivers and stated that; it was time “take this bulls eye off the backs of our farmers.” Kind and Johanns use this phrase in reference to potential risks associated with WTO litigation asserting that current Title I commodity supports may not be in compliance with WTO covered agreements.

Graph from The Wall Street Journal Online.

Rep. Kind also noted that the market prices for some program crops are currently strong and that this price environment would be conducive to a change in the direction of Title I.


Washington Post: “The Rising Tide of Corn.”

Reuters writer Doug Palmer reported yesterday that, “Months of behind-the-scenes work could lead to dramatic progress in world trade talks next week when top trade officials from the United States, European Union, Brazil and India meet in Potsdam, Germany, the chief U.S. negotiator said on Thursday…‘We’re really hoping we can move the ball forward and ideally move it forward dramatically,’ U.S. Trade Representative Susan Schwab told Reuters in an interview. ‘The United States is committed to doing our share and then some’ to reach a final deal in the talks, she said.”

I. Corn / Biofuels
II. Farm Bill Debate
III. Doha

I. Corn / Biofuels

Michael S. Rosenwald reported in today’s Washington Post that, “The nation’s unquenchable thirst for gasoline — and finding an alternative to what’s been called our addiction to oil — has produced an unintended consequence: The cost of the foods that fuel our bodies has jumped. (Picture at right from The Kansas City Star Online).

“Beef prices are up. So are the costs of milk, cereal, eggs, chicken and pork.

“And corn is getting the blame. President Bush’s call for the nation to cure its addiction to oil stoked a growing demand for ethanol, which is mostly made from corn. Greater demand for corn has inflated prices from a historically stable $2 per bushel to about $4.

“That means cattle ranchers have to pay more for animal feed that contains corn. Those costs are reflected in cattle prices, which have gone from about $82.50 per 100 pounds a year ago to $91.15 today.”

The article also noted that, “But now some economists and analysts say the corn price increase could combine with other factors — poor weather and soaring energy costs — to unsettle the food industry, since corn products are used not just to feed animals but also in high-fructose corn syrup, the sweetener of choice for such products as soft drinks and cookies.”


EWG Database Update

Associated Press writer Lauren Villagran reported yesterday that, “Wheat prices surged to a record high for 2007 Monday as heavy rains threatened to damage an already tarnished crop…. While rain soaked Midwestern wheat fields on Monday, dry skies stifled the moisture-hungry eastern Corn Belt, sending corn prices above $4 a bushel… Bullish traders also ran with a report from the U.S. Department of Agriculture on Monday in which the agency lowered its projections for winter wheat production this month and raised its export projections. Shortfalls in other producing nations will raise overseas demand for U.S. wheat, the USDA said.”

I. EWG Database Update
II. Energy Bills
III. Canada’s WTO Case / Doha
IV. Grain Prices

I. EWG Database Update

Associated Press writers Sam Hananel and Mary Clare Jalonick reported yesterday that, “From Texas billionaires to Washington lobbyists, it’s no secret that wealthy people can get federal farm subsidies.

“But now, for the first time, new Agriculture Department data makes it easier to see exactly who benefits from the nation’s generous farm subsidy program.

“Instead of having to sift through a complex web of corporations, partnerships and other business entities, the USDA has assigned a specific dollar amount to the individuals behind the businesses.

The Environmental Working Group (EWG) will release an update to their searchable database of farm subsidy recipients today.

“Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, said the new data could affect farm bill negotiations this year as lawmakers consider reducing direct payments to farmers.”


Canada Takes U.S. Farm Subsidy Complaint to WTO

Categories: Canadian Corn Case

Ken Cook, writing yesterday at the Mulch blog, pointed to an article published yesterday at Canada East Online, which stated that, “Canada has gone to the World Trade Organization to fight what it calls harmful American farm subsidies.

“International Trade Minister David Emerson has asked for a WTO panel to rule on whether U.S. agriculture subsidies breach that country’s own international trade rules.

“Emerson says requesting a panel is the latest step in Canada’s fight against U.S. subsidies that are hurting Canadian farmers.”

Interestingly, recall that, “On May 2, 2007, the Canadian International Trade Minister announced that the Canadian government would hold off on taking any further action in its World Trade Organization (WTO) dispute settlement proceeding (DS357) against U.S. corn subsidies until at least the end of the year pending the outcome of current Doha Round trade negotiations. Earlier this year, Canada had taken the first step in instituting a WTO dispute settlement case when it requested consultations with the United States to discuss Canadian concerns regarding certain aspects of U.S. commodity programs in general, and the U.S. corn program in particular.” (See, “U.S.-Canada WTO Corn Trade Dispute,” a Congressional Research Service publication by Randy Schnepf, which was updated on May 4.)

The corn case issue goes back to at least 2005, “when Canadian corn producers sought legal action for alleged unfair subsidization and dumping of U.S. corn in Canadian markets. Canada’s International Trade Tribunal (CITT) ultimately ruled on the 2005 AD/CV duty case in favor of the United States. However, Canadian corn producers continued to press their concerns upon the Canadian government about perceived unfair subsidization of U.S. corn” (Schnepf page one).

Philip Brasher, writing yesterday at The Des Moines Register Online provided this succinct summary of the latest Canadian action, “Canada is accusing the United States of spending more on farm subsidies than international trade rules allow.”

Mr. Brasher explained that, “Under WTO rules, the United States can provide up to $19.1 billion annually in subsidies that are considered trade distorting. Canada says the United States broke the rules every year from 1999 to 2005 except for 2003.”

The Register article also brought up the corn case, noting that, “Brook Grantham, a spokesman for the Canadian trade ministry, said his country is still challenging U.S. corn subsidies but under the broader umbrella of overall farm spending. An internal trade panel in Canada ruled last year that Canadian growers had not been harmed by U.S. corn subsidies.”

Douglas Belkin, writing in today’s Wall Street Journal, added that, “The [Canadian WTO] request comes as U.S. lawmakers are drafting a new farm-subsidies bill and the Group of Eight members called on WTO members to demonstrate the flexibility needed to conclude the stalled, six-year-old Doha talks.

“‘We remain concerned that the U.S. is providing agricultural subsidies in breach of its WTO commitments,’ David Emerson, Canada’s Minister of International Trade, said in a statement. ‘Requesting a dispute settlement panel reinforces our efforts in the Doha negotiations toward reducing trade-distorting U.S. subsidies.’”

A Reuters news article from today noted that, “It is the first broad challenge of United States farm programs, a Toronto trade lawyer, Lawrence Herman, said, noting that Brazil successfully challenged a U.S. cotton subsidy at the W.T.O.”

And this morning, the Mulch blog pointed to a news release issued yesterday by Foreign Affairs and International Trade Canada, which stated that, “Canada’s request for a WTO panel has two main objectives. The first objective is to address the total level of U.S. trade-distorting agricultural subsidies (often called “Amber Box” subsidies). Under its Total Aggregate Measurement of Support (Total AMS) commitment, the U.S. is allowed to provide support of up to $US19.1 billion annually in agricultural trade-distorting subsidies. Canada’s position is that the U.S. has exceeded its Total AMS commitment in each of 1999, 2000, 2001, 2002, 2004 and 2005.

“The U.S. Total AMS consists of subsidies to a wide range of agricultural products, including, but not limited to, corn, wheat, soybeans, pulses, and sugar. These trade-distorting subsidies are provided through dozens of U.S. programs, such as direct payments, loan deficiency payments and counter-cyclical payments, which harm the economic interests of Canadian farmers and disadvantage them in their domestic and international markets.

“The second objective of Canada’s panel request is meant to address export credit guarantees to certain agricultural products (such as corn and soybeans) provided through the General Sales Manager (GSM) 102 program. Canada’s position is that the U.S. GSM 102 program provides export subsidies that are inconsistent with its WTO obligations.

“The majority of U.S. agricultural subsidies derive from Farm Bill programming. It is Canada’s view that these programs are trade distorting and require reform. Canada believes that it is an opportune time to press the U.S. to comply with its WTO obligations given that it is in the process of rewriting its Farm Bill.”

The release also explained that, “WTO consultations held with the United States in February 2007 did not resolve these issues. As a result, Canada is proceeding with a request for a panel, which is the next formal step in the WTO dispute settlement process. In its consultations, Canada raised concerns that U.S. corn subsidies were causing, or threatening to cause, serious prejudice to Canadian corn growers by significantly suppressing Canadian prices. Canada has chosen not to include this element in the current request for a WTO Panel. However, our case on Total AMS includes the same programs, and the subsidies paid out to U.S. corn farmers under these programs, that were at issue in the WTO consultations on serious prejudice. Canada retains the right to seek a WTO panel on serious prejudice on corn at a later date.”

For more on the “total AMS” issue, see, “Agriculture in the WTO: Limits on Domestic Support,” by Randy Schnepf, Congressional Research Service, May 10, 2005.

Keith Good

Energy Issues: Food Costs

Reuters news reported yesterday that, “Canada will likely hold off until year’s end, at the earliest, if it is to file a World Trade Organization challenge to U.S. farm subsidies as it monitors the progress of world trade talks, Canada’s trade minister said on Wednesday…’We’re going to be looking at the corn subsidy issue in the context of the evolution, or likely evolution, of the Doha round,’ Trade Minister David Emerson told reporters after addressing a pan-American conference in Washington.”

I. Energy Issues: Food Costs
II. Doha
III. Farm Disaster Payments
IV. Food Safety

I. Energy Issues: Food Costs

Doug Cameron reported earlier this week in the Financial Times that, “US consumers face higher meat prices during the summer grilling season as the ethanol-driven rise in corn costs works through the food chain, according to Tyson, the world’s largest beef and chicken producer.

“The US group said it had passed on some of the rise in corn-derived animal feed costs to consumers, but expects the spike at the start of the year to emerge in the quarter to June.

Chinese wheat glutton imports continue to generate news with respect to food safety- “Shipments are stacked outside the Xuzhou Anying Biologic Technology Development Company in China.” (Picture and quote from The New York Times Online).

“Tyson has led calls within the industry for policymakers to recognise the competing claims on corn and other feedstocks from food and the fast-growing alternative energy sector, which is expected to claim a quarter of the US corn crop this year. Dick Bond, chief executive, said there could be a ripple effect on global food prices if a balance was not achieved.”


Canadian Corn Case Grows

I. Canadian Corn Case Grows / Doha
II. New Farm Bill Proposal
III. Disaster Aid
IV. Ethanol, State of the Union

I. Canadian Corn Case Grows / Doha

The Associated Press reported yesterday (“Argentina, Brazil join WTO complaint against U.S. corn subsidies”) that, “South American agricultural leaders Argentina and Brazil have joined Canada in a complaint against the United States over what they claim are illegal government handouts to American corn growers, trade officials said Monday.

“The request for consultations, filed by the two countries and Guatemala last week at the Geneva-based World Trade Organization, threatens a major commercial dispute in the Western Hemisphere at a time when global free trade talks remain stalled over agricultural tariffs and subsidies and the U.S. begins debating a new multibillion-dollar farm bill.

“Under WTO rules, a three-month consultation period is required before a country can ask the trade body to launch a formal investigation. A WTO case can result in punitive sanctions being authorized, but panels take many months, and sometimes years, to reach a decision.”

The A.P. article reminded readers that, “The WTO, in a case brought by Brazil, already has ruled that some cotton subsidies are illegal and the administration of President Bush has been coming under pressure to reform a number of its farm support programs.

“‘Many of the issues in Canada’s complaint we have also complained about concerning U.S. cotton programs,’ said [Clodoaldo Hugueney, Brazilian ambassador to the WTO] in a telephone interview from Geneva.

“Canada’s complaint over U.S. corn support also challenged whether the billions of dollars in overall farm subsidies paid out by the U.S. government comply with international commerce rules.”


FT: “US and EU Near Farm Trade Deal”

I. Doha-Canadian Corn Case
II. “Two Farm Bill Debates”- How Much Money and How it Will be Allocated
III. Renewable Fuels- Additional Budget Allocations?
IV. Farm Bill- Ethanol, Conservation
V. Market Dynamics
VI. Farm Bill Opinion

I. Doha-Canadian Corn Case

Eoin Callan and Alan Beattie, writing in today’s Financial Times, reported that, “Trade negotiators from the US and European Union have reached the brink of an agreement that could restart stalled world trade talks, according to people familiar with the discussions.”

The article added that, “The proposed outline of an agreement between the world’s two largest trading blocs includes politically explosive concessions that are already causing rifts in Europe and alarm in the US farm lobby.

“The fragile deal that is starting to emerge has yet to be finalised and comes amid tremendous uncertainty about whether negotiators can get the political backing to achieve a breakthrough in the Doha round of trade talks.”


“Every Member of Congress Now Has Discovered Ethanol”

I. Ethanol-Renewable Fuels
A. Politics and Economics
B. Ripple Impacts
1. Land Values
2. Corn on Corn Planting
3. Farm Policy
II. Oilseeds
III. Canadian Corn Case
IV. Doha
V. Freeze, Prices Up

I. Ethanol-Renewable Fuels
A. Politics and Economics

Brendan Murray and Tina Seeley of Bloomberg news, reported yesterday that, “Administration officials say Bush’s seventh annual address to Congress on Jan. 23 will reiterate his vow to cut Middle Eastern oil imports by 75 percent by 2025 and curb what he describes as a national ‘addiction’ to fossil fuels. Democrats and the White House are likely to agree to boost support for biofuels, increase federal funding for electric-powered vehicles and sweeten incentives for the use of solar and wind power, lobbyists and industry experts say.”

The article added that, “At the same time, a bipartisan group of senators –including Tom Harkin, a Democrat from corn-producing Iowa, Richard Lugar, an Indiana Republican, and Barack Obama, an Illinois Democrat — introduced legislation earlier this month to give tax credits for cars that can run on fuel that is mostly ethanol.

“‘Every member of Congress now has discovered ethanol,’’ Representative Collin Peterson, a Minnesota Democrat who heads the House Agriculture Committee, said in an interview. By mentioning biofuels such as switchgrass in his 2006 State of the Union address, Bush ‘really started people thinking,’ says Peterson, 62.”

Corn Harvest, Photo by the Associated Press

The Bloomberg writers also noted that, “Mark McMinimy, an analyst with Stanford Group in Washington, said in a note to his clients last week that ‘it is becoming increasingly apparent that the renewable fuels/ethanol juggernaut enjoys one of the most prized commodities in Washington: broad- based, bipartisan political momentum.’”


FT: Doha Analysis

I. Doha
II. Canadian Corn Case
III. Farm Bill: News and Perspectives
IV. Cold Weather Harms Crops

I. Doha

Eoin Callan, writing in today’s Financial Times, reported that, “George W. Bush left US and European Union trade negotiators in no doubt about what he expected when they met to discuss the deadlock over the Doha round of the world trade talks.

“A US diplomat said of last week’s Oval Office meeting: ‘He [Mr Bush] was staring Peter Mandelson in the eye and his own trade representative in the eye and saying: ‘Get this done.’ That kind of face-to-face with the president doesn’t happen very often.’

“Following her president’s instructions, Susan Schwab returned to the negotiating table with Pascal Lamy, World Trade Organisation director-general, who called a halt to the Doha round last year amid a stalemate over agricultural policy.”

Drip irrigation creates icicle coverings in effort to insulate oranges against an unusual cold snap (The New York Times).

After a note about the Democratic majorities’ perspective on trade in the new Congress, the FT article pointed out that, “The party is wary, however, of prematurely committing members of Congress from rural states to a package likely to be unpopular with the powerful agricultural lobby.”


U.S.D.A. Reports: Clearer Picture For Production, Prices and Corn / Ethanol Considerations

I. U.S.D.A. Reports
II. Canadian Corn Case
III. Disaster Aid
I. U.S.D.A Reports

Yesterday (January 12), the U.S. Department of Agriculture released three key reports, which contained additional information on U.S. crop production and usage. The current supply and demand snapshot will have implications with respect to market prices, production allocation decisions, federal farm payment distributions and consumer prices.

Policy makers will examine the results of these recent reports closely as they set to work on the 2007 Farm Bill, particularly with the keen bipartisan political interest in renewable energy issues that currently permeates the executive branch, the new Congressional leadership and House and Senate Agriculture Committees.

Corn Planting
N.A.S.S. Will Release Corn Planting Projections in March

In anticipation of the release of the reports, Joe Poncer stated in Friday morning’s Wall Street Journal that, “Chicago Board of Trade corn futures settled sharply higher, as large-scale position-squaring ahead of today’s Department of Agriculture production and stocks data pushed prices higher, sources said.

“Most-active March corn rose 16.25 cents to $3.765 a bushel. Corn yesterday rose as high as $3.8025 a bushel, up 20 cents, which is the exchange-imposed daily price limit.”


Farm Bill: Budget & Trade Issues

I. Farm Bill Budget, Spending
II. Doha
III. Canadian (Brazilian?) Corn Case
IV. Johanns on the Farm Bill

I. Farm Bill Budget, Spending

Alexei Barrionuevo, writing in today’s New York Times, reported that, “With a costly war in Iraq, mounting budget deficits and record-high crop prices, administration officials said this week that farmers should expect to receive smaller agricultural payments in this year’s Farm Bill.

“But wait, say some Congressional leaders, who are clamoring for more dollars for farmers. More money is needed to accelerate research into biofuels like ethanol, which is considered crucial to reducing the country’s reliance on imported oil and for buttressing the Midwest economy.”

Photo by The New York Times

The Times article went on to explain that, “Amid soaring crop prices, fueled in part by global droughts and rising demand for corn-based ethanol, subsidies are expected to drop by $7 billion this year, to about $13.5 billion. Agriculture officials expect demand for corn in particular to continue to be strong as dozens of ethanol plants come online this year. That will mean farm payments are expected to be lower for at least a few years.

“In this new environment, some trade specialists see an opportunity for Congress to cement those savings by lowering the financing structure. That could give the United States greater leverage in negotiations at the World Trade Organization, which remain stalled over agriculture payments. Whether Congress will vote to lower those ‘baseline’ levels ‘is the question that a lot of discussion and debate will be devoted to over the next 30 to 60 days,’ Agriculture Secretary Mike Johanns said.”


Reaction to Canada’s Move on Corn

I. Canadian Corn Issue
II. Johanns: Trade, Equity and Budget Issues
III. Doha: “The Political Chemistry is Beginning to Work”
IV. EU Farm Policy
V. Senate Ag Committee Hearing on Energy

I. Canadian Corn Issue

The Canadian Government’s requested consultations with the United States at the World Trade Organization (WTO) regarding subsidies provided to U.S. corn growers continues to percolate in recent press reports.

Canada has Concerns About U.S. Corn Subsidies (Photo by U.S.D.A.)

Yesterday, an editorial published in the Edmonton Journal, indicated that, “To be sure, Canada’s concerns, even if ultimately backed by a favourable tribunal ruling, are as unlikely to outweigh U.S. domestic political considerations on corn as they were on softwood lumber.

“But the move is still a useful intervention as the new Democratic majorities in the U.S. Congress — a group possibly even more protectionist than its Republican predecessors — prepare to consider renewing and possibly enriching the country’s farm bill.”


Doha: Down But Not Out

I. Doha
II. Budget Issues
III. Farm Bill Issues
IV. Canada Corn Action
V. Senate Hearing

I. Doha

Renewable energy issues, increased production of corn-based ethanol plants and the higher market price of some program crops, such as corn, have garnered more attention in the 2007 Farm Bill debate over the past three months.

Some Suggest Congress Should Play a Larger Role in the Doha Talks

The possibility of a new price plateau for a key program crops like corn and the resulting implications for subsidy payments, safety net provisions and rural development issues will likely be a leading factor in the Farm Bill debate.

Simultaneous to the unexpected change in commodity market dynamics, has been the suspension and resulting stagnation in the Doha Round of W.T.O. trade negotiations. Not long ago, the Doha talks were viewed as one of the most significant features of the upcoming farm policy debate.

Despite this issue reprioritization, recent developments suggest that the Doha talks could yet resuscitate and could potentially impact the debate over trade promotion authority and may still play a meaningful role in the formulation of next Farm Bill.


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