Among the First Out of the Gate . . .
Posted by: Phillip Fraas
January 16, 2007

Now that the new 110th Congress has begun work, we can expect to see key members of the congressional agriculture committees begin describing what the new farm bill might look like. In addition, early to mid January is the busiest time of the year for the annual meetings of the big national farm organizations at which congressional leaders are invited to speak. This confluence of events has led to a couple early declarations of intentions regarding the farm bill that are worth passing on.

THE HOUSE AGRICULTURE CHAIRMAN SPEAKS OUT: The new chairman of the House Committee on Agriculture, Collin Peterson (Dem.-MN), spoke at the annual convention of the American Farm Bureau Federation earlier this month. He told the Farm Bureau members that his committee would not wait to see if the Doha Round trade negotiations might restart in earnest before it begins drafting the farm bill. Further, he indicated he is opposed to eliminating a provision in the current farm bill (that prohibits fruit and vegetable growers from receiving direct payments) in order to avoid a World Trade Organization (WTO) challenge to the U.S. subsidy programs. More on the Doha Round and the possible WTO challenge in the paragraph following the next.

He also said that his committee's farm bill proposal will look very similar to the current 2002 farm bill programs. Also, he would like to set up a permanent disaster assistance program to farmers, and hopes there is money available for the development of renewable energy/ethanol programs. However, he pointed out that the agriculture committee will have to wait until the congressional budget estimates come out in March to get a better sense of whether there will be money available for such ambitious new programs.

[A note on Doha and the WTO: President Bush and EU Commission President Jose Barroso, at their bilateral summit on January 8, committed to have their staff negotiators begin work to come to a solution to resolve the US-EU differences on agricultural trade in the Doha Round trade negotiations. So, while many believe (and are reasonable in doing so) that Doha is dead for this year, there remains a small possibility that a breakthrough might be reached within the next few weeks that would impel Congress to extend the President's "fast track" negotiating authority, which expires at midyear. Doing so would allow Doha negotiations go forward to fruition as early as this year and might force the congressional agriculture committees to consider Doha proposals in crafting a new farm bill. As to the WTO challenge to the U.S. farm bill programs, last year Brazil won a WTO challenge to the U.S. cotton program that is still having ramifications for the farm bill even after the U.S. agreed to fix the export subsidy program that was the main impetus for Brazil's WTO challenge. The wording of  the WTO decision in favor of Brazil has drawn into question the compatibility with United States WTO obligations of a minor, but key, element of U.S. price support policies--the prohibition against fruit and vegetable growers from receiving direct farm bill payments. Some want to fix this WTO problem in the new farm bill, while others, such as Chairman Peterson, are wary that doing so could undermine support for the farm bill among fruit and vegetable growers--who fear that, without the prohibition, grain, oilseed, and cotton growers might be encouraged to start growing their commodities in competition with them. On a different front, Canada recently announced it would pursue WTO remedies for the trade distortions--and adverse impact on its corn growers--allegedly caused by this U.S. program feature and others, but encouraged the U.S. to use the farm bill process to address its concerns. While the Canadian challenge is unlikely to have much direct affect on the farm bill debate, it highlights how WTO considerations could yet be a major part of the farm bill calculus. ]  

THE FARM BUREAU WANTS TO CONTINUE CURRENT FARM BILL POLICIIES: At its convention, the membership of the Farm Bureau (which is probably the most influential general-membership farm organization) approved a policy that calls for a new full-term farm bill that simply extends 2002 farm bill programs. In doing so, it puts the Farm Bureau on the side of many in Congress, including the Democratic farm leadership, who favor an extension of current programs against Secretary of Agriculture Johanns who has recommended substantial changes in the programs. The new Farm Bureau policy switchs gears considerably from last year, when the organization called for just a one-year extension of the 2002 farm bill to allow time for Doha negotiations to be completed.

P.S. The Washington Post, in an editorial published on January 8, called for a complete overhaul of the federal farm subsidy system, expressing its belief that the current programs distort the markets to push smaller farmers out of business. The Post cited the series of articles it had run in 2006 (and described in this blog) in explaining its position.

Permalink

Straws in the Wind--Part II
Posted by: Phillip Fraas
January 04, 2007

Congress just begins its new session today so it is too early to look for developments on Capitol Hill regarding the new Farm Bill Congress will draft this year. It is not, however, too early to note and pass on reports of developments elsewhere that could influence the development of the Farm Bill.

 CORN AND SOYBEAN PRICES: Yesterday in the futures markets, even after sharp declines, March corn was trading at $3.70 a bushel, and January soybeans were going for $6.69 a bushel. If these bullish prices hold up (and it is hard to imagine a drastic decline as long as demand factors like ethanol production don't flag), the effect on the development of the Farm Bill might be considerable.

Both commodities have been responsible for a good portion of farm bill outlays in the past; but with market prices higher, the need for the outlays lessens. The result: less budget pressure to change current programs substantially. Also, the high prices for corn have to scare the heck out of livestock and poultry producers; and consumer groups will be concerned about possible increases in food prices as the higher input costs are passed along. Thus, also, look for the agriculture committees to think about ways to ensure that the demands of ethanol producers don't result in a permanently short market for corn.

MORE FROM THE WASHINGTON POST: I first mentioned last October the series of articles The Washington Post was doing on farm policy. The Post is still at it, publishing two additional parts of its series last month: December 21, 2006 "The myth of the small farmer (federal subsidies turn farms into big business)"; December 22, 2006 "The fight over the farm bill (powerful interests ally to restructure agriculture subsidies)".   

Given that the thrust of the Post series is to question the worth and cost of the current Farm Bill programs, it will be interesting to see how the defenders of agricultural programs in Congress respond to these implicit attacks on the Farm Bill, and whether the series will become part of the fabric of the 2007 Farm Bill drafting process. As to the latter, I think it is too early to tell; but if the Post series starts being circulated and quoted, look for tougher sledding for Farm Bill partisans during the congressional floor debate on the legislation later this year (especially in the House where there are many congressmen whose districts have no rural components and thus have no constituent pressure to vote for farm programs).

 FARM BILL FOOD FIGHT?: There was another e coli outbreak associated with green vegetables in December, this time involving iceberg lettuce or green onions in the Northeast; and this development got a lot of press. Thus, I suspect the safety of our food supply has become an issue on many people's minds right now.

The Administration and the food industry are working hard to deal with the problem, with recent reports that new handling and processing standards for vegetables will be promulgated in March. If those standards don't mollify the concerns of food safety advocacy groups in Washington and if the worst happens and there is yet another food poisoning outbreak, look to the possibility that the fight over strengthening Federal food safety rules laps over into and perhaps reshapes the Farm Bill debate. There are a lot of ifs for such a scenario to occur, and traditionally food safety issues have not been part of the Farm Bill debate; so it is not something that needs focusing on now, just kept an eye on.

Permalink