Latest Developments on Farm Bill & Biofuels

Pres. Bush Influences Farm Bill Dynamics; Biofuels, Post Series

At a White House press conference yesterday that focused on the U.S. domestic economy, President George W. Bush addressed food prices, the Farm Bill and biofuels.

Sheryl Gay Stolberg and David M. Herszenhornsummarized in today’s New York Times that, “With consumer confidence slipping and gasoline and food prices soaring, President Bush delivered an unusually dark assessment of the economy on Tuesday, saying the nation was in ‘very difficult times, very difficult.’”

More specifically on agriculture, Pres. Bush stated that, “Americans are concerned about rising food prices. Unfortunately, Congress is considering a massive, bloated farm bill that would do little to solve the problem. The bill Congress is now considering would fail to eliminate subsidy payments to multi-millionaire farmers. America’s farm economy is thriving, the value of farmland is skyrocketing, and this is the right time to reform our nation’s farm policies by reducing unnecessary subsidies. It’s not the time to ask American families who are already paying more in the check-out line to pay more in subsidies for wealthy farmers. Congress can reform our farm programs, and should, by passing a fiscally responsible bill that treats our farmers fairly, and does not impose new burdens on American taxpayers” (Audio clip is available here- MP3-0:54).

!ADVERTTISEMENT!

Also, this exchange on biofuels and food prices took place in the question and answer portion of the press conference: “Q The World Bank says about 85 percent of the increase in corn price since 2002 is due to biofuel — increased demand for biofuels. And your Secretary of State said that — indicated yesterday that she thought that might be part of the problem. Do you agree with that? And what can the United States do — what more can the United States do to help make food more affordable around the world?

“THE PRESIDENT: Actually, I have a little different take: I thought it was 85 percent of the world’s food prices are caused by weather, increased demand and energy prices — just the cost of growing product — and that 15 percent has been caused by ethanol, the arrival of ethanol.

“By the way, the high price of gasoline is going to spur more investment in ethanol as an alternative to gasoline. And the truth of the matter is it’s in our national interests that our farmers grow energy, as opposed to us purchasing energy from parts of the world that are unstable or may not like us.

“In terms of the international situation, we are deeply concerned about food prices here at home and we’re deeply concerned about people who don’t have food abroad. In other words, scarcity is of concern to us. Last year we were very generous in our food donations, and this year we’ll be generous as well. As a matter of fact, we just released about $200 million out of the Emerson Trust as part of a ongoing effort to address scarcity.

“One thing I think that would be — I know would be very creative policy is if we — is if we would buy food from local farmers as a way to help deal with scarcity, but also as a way to put in place an infrastructure so that nations can be self-sustaining and self-supporting. It’s a proposal I put forth that Congress hasn’t responded to yet, and I sincerely hope they do” (Audio clip is available here- MP3-2:23).

David Rogers, writing yesterday at Politico.com, reported that, “Thus far, House-Senate negotiators have been willing to exclude only wealthy individuals who earn $500,000 or more in nonfarm income. But there were signs of new movement Tuesday night, and the administration is pressing for a ‘hard cap’ that would deny commodity payments to even full time farmers whose average adjusted gross income over three years exceeded $500,000.

“‘We have moved considerably on reform,’ said House Agriculture Committee Chairman Collin Peterson (D-Minn.) Tuesday night. ‘There is more reform in here than there was this morning,’ said Virginia Rep. Robert Goodlatte, the ranking Republican on the House panel.”

Mr. Rogers noted that, “Neither man would discuss details, but the House had approved a cap at $1 million only to see it dropped in talks to appease Southern cotton and rice interests allied with Georgia Sen. Saxby Chambliss, the ranking Republican in the negotiations.

“It is doubtful that the new compromise will go as far as the administration wants, but Chambliss conferred with two fellow Southerners, Sens. Blanche Lincoln (D-Ark.) and Thad Cochran (R-Miss.) in the hallway outside the negotiations. And the Georgian confirmed that he is testing a new configuration in hopes of putting the issue to rest and avoiding a veto fight.

“For the White House, the income cap remains a signature issue after first wanting a still lower $200,000 ceiling. And for this Republican president, Tuesday’s press conference was a rare example of using the class card to full political effect at a time of rising food prices.”

Philip Brasher, writing yesterday at The Des Moines Register Online, reported that, “However, the president stopped short of threatening to veto the new bill that congressional negotiators are struggling to finish.

“Top administration officials later went to the Capitol and met privately with the lawmakers for nearly two hours to discuss differences over the legislation.

“Sen. Tom Harkin, the chairman of the Senate agriculture committee, described the meeting with Agriculture Secretary Ed Schafer and the deputy agriculture secretary, Charles Conner, as ‘very productive’ and ‘open and frank.’ Conner said they had a ‘useful discussion.’”

“Among the main issues they talked about was Bush’s insistence that Congresstighten income eligibility limits for farm subsidies, Harkin said.”

In a press conference with reporters yesterday(MP3-4:32), Senate Finance Committee Ranking Member Chuck Grassley (R-Iowa) provided some background on the Farm Bill negotiations. Among other things, Sen. Grassley indicated that he was encouraged by the President making his statement on the Farm Bill and noted that the comments “are going to cause us to reconsider some positions we’ve had.”

Sen. Grassley cautioned that negotiations had not been finalized, but stated that, “I think it’s a step forward that the President has made his statement today that he made.”

The Associated Pressreported today that, “House and Senate negotiators scrambled late Tuesday to meet President Bush’s demands on a multibillion-dollar farm bill, considering reduced subsidies for wealthy farmers.”

The AP article stated that, “Earlier in the day, Bush had renewed his call to reduce such subsidies, saying the ‘massive, bloated’ bill would do little to stem rising food costs. Negotiators met with Agriculture Secretary Edward T. Schafer soon afterward…That meeting was ‘sobering,’ said Sen. Kent Conrad (D-N.D.). He said the administration had a laundry list of demands for the legislation, which lawmakers were hurrying to finish before the current farm law expires Friday.”

The article added that, “Emerging from several hours of meetings, Conrad and Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) said negotiators would further limit subsidies and cut other spending in response to the administration’s demands.

“‘We moved considerably,’ said Harkin, though he declined to share specifics and said all of the bill’s negotiators had not yet agreed on the cuts.”

Reuters writer Charles Abbottreported yesterday that, “The senior negotiators from the House and Senate said they accommodated many White House proposals for farm subsidy reform on Tuesday in preparing the new U.S. farm law for a final series of votes.”

Mr. Abbott noted that, “Agriculture Secretary Ed Schafer met negotiators for two hours to spell out the administration’s goals, such as an end of crop subsidies to the wealthiest Americans.”

“Meeting in private throughout Tuesday, senior negotiators acted on crop subsidy rules, land stewardship programs, language to prevent abuse of price supports and whether fruit and vegetables will continue to be barred on land eligible for crop subsidies. Harkin and other leaders said they would not discuss details until they briefed other negotiators,” the Reuters article said.

Mr. Abbott stated that, “For months, the administration has urged an income cutoff point for access to crop subsidies — $500,000 in adjusted gross income if Congress adopts broad-scale reform or as low as $200,000 AGI if there was little reform. Farm-bill negotiators did not want any limit on income from farming although they proposed a cap of $500,000 or $750,000 for off-farm income.

“‘We did move toward the White House — big time,’ said Harkin when asked about the issue. The Republican leader on the Senate committee, Georgia Sen. Saxby Chambliss, said there was significant reform. Like Harkin, he declined to be specific.”

Despite perceived movement in smaller, private Farm Bill discussions, DTN writer Chris Claytonreported yesterday that, “Kansas leaders on the farm-bill conference committee argued Tuesday they were being shut out of the negotiations and promised that once open talks occur again, they plan to restore funding to programs such as crop insurance and direct payments that are slated to take cuts in the farm-bill framework announced last week.

“Talks among key negotiators in the farm bill are getting close to wrapping up, but the principals involved took time out on Tuesday to hear from Bush administration officials and see what can be done to address the White House’s concerns. Lawmakers cancelled a formal conference meeting, but another meeting is expected to be scheduled for Wednesday.”

Mr. Clayton explained that, “The Bush administration, however, does not support a cut in the $5.2 billion annual direct payments, which were created in the 1996 farm bill by Sen. Pat Roberts, R-Kan., when he chaired the House Agriculture Committee. A defender of direct payments ever since, Roberts and Rep. Jerry Moran, R-Kan., said Tuesday that a $400 million reduction in direct payments over four years is not acceptable.”

The DTN article added that, “Roberts and Moran said direct payments are being cut at the direction of House Speaker Nancy Pelosi, D-Calif., to boost nutrition programs. Moran noted that ‘significant problems’ lie on the House side and stem from the fact that the farm-bill funding framework was ‘generally driven’ by Speaker Pelosi and by House Ways and Means Chairman Charles Rangel, D-N.Y., who was tasked with coming up with money for the farm bill but are ‘insisting that their priorities, which are not always, perhaps ever, the priorities of the people back home.’”

On the issue of direct payments, the Environmental Working Group issued a press release  yesterday, which noted in part that, “The names of the direct payment subsidy recipients and the amount they received in 2007 were released online today by Environmental Working Group (EWG).”

Meanwhile, Greg Hitt reported in today’s Wall Street Journal that, “The troubled nation of Haiti would benefit from trade preferences Rep. Charles Rangel wants in the farm bill coming together on Capitol Hill, but the move risks injecting trade politics into legislation that already has stirred controversy over farm subsidies.

“The New York Democrat’s amendment is one of several provisions members of Congress are tacking on to the five-year, nearly $300 billion bill.”

Mr. Hitt explained that, “With momentum gathering, the measure is a magnet for the targeted ambitions of members in both parties. Already, the bill includes faster tax write-offs for investments in racehorses and lowered tax rates for American timber companies. It is also expected to include a rider authorizing the Justice Department to prosecute timber smugglers, a measure pushed by Rep. Earl Blumenauer, the Oregon Democrat.

“For Mr. Rangel, chairman of the House Ways and Means Committee, the Haiti initiative is a small price to exact after having been tapped by Democratic leaders to help develop financing for $10.4 billion in new spending on nutrition programs.

“The measure is designed to increase Haitian textile and apparel trade by easing rules under an existing U.S. trade preference program. The proposal would ensure that Haitian apparel could be shipped to the U.S. duty free, while allowing Haitian manufacturers to use low-cost yarn and fabric from around the globe, instead of just from American suppliers. It would aid apparel companies that do business in Haiti, such as Cintas Corp., an Ohio uniform company.”

(As a side note on the Farm Bill, Manu Raju  reported yesterday at The Hill Online that, “Sen. John McCain (R-Ariz.) is leaning against backing a massive farm bill that would rewrite agriculture policy over the next five years, a choice that puts him in between his fiscal conservative base and rural states important in the general election.”)

Also yesterday, DTN writer Chris Clayton reported (link requires subscription) that, “Despite calls from food-industry leaders and trading partners to strip away the 54-cent-per-gallon tariff on imported ethanol, the new farm bill would instead extend the tariff for two more years even as Congress also cuts domestic support for corn-based ethanol.

“As Congress adjusts ethanol policy in the farm bill, lawmakers are planning to extend the 54-cent tariff on imported ethanol while also lowering the domestic ethanol blenders’ credit nearly 12 percent. The combined effect of the two measures lowers support for most current ethanol production, but continues a policy of ensuring sugar-based ethanol remains more expensive to import from countries such as Brazil.”

Biofuels

Reuters writer Missy Ryan reported yesterday that, “A moratorium on global grain- and oilseed-based biofuels would help ease raging wheat and corn prices by up to 20 percent in the next few years, a leading agriculture research group said on Tuesday.

“‘Our models analysis suggest that if a moratorium on biofuels would be issued in 2008, we could expect a price decline of maize by about 20 percent and for wheat by about 10 percent in 2009-10. So it’s this significant,’ Joachim von Braun, who heads the International Food Policy Research Institute (IFPRI), told reporters in a briefing.”

Also yesterday, an item posted at Forbes.com  stated that, “The European Commission said biofuel production has ‘no effect’ on European food prices.

“In response to the claim that the commission said there would be no effect on world food prices, a spokesman said: ‘No one has ever said that there is no effect.’

“’What we have said is that the growing of biofuels around the world is a factor in the food price debate,’ he added. ‘But we have said clearly that there is no effect in the European Union.’”

An update posted yesterday at the European Commission Online indicated that, “EU Trade Commissioner Peter Mandelson argues that sustainability must guide EU policy on biofuels. Writing in The Guardian he argues that this meant carefully weighing expansion of global biofuel production against its impact on the environment and food prices.”

An update posted yesterday at The Corn Commentary Blog  noted that, “The development of alternative feedstocks for ethanol doesn’t mean that corn ethanol will be thrown under the bus, according to Agriculture Secretary Ed Schafer.” This update also includes audio excerpts from Sec. Schafer on biofuels (2:20).

Post Series, “Global Food Crisis” Continues

Steven Mufson  reported in today’s Washington Post (“Siphoning Off Corn to Fuel Our Cars”) that, “Across the country, ethanol plants are swallowing more and more of the nation’s corn crop. This year, about a quarter of U.S. corn will go to feeding ethanol plants instead of poultry or livestock. That has helped farmers like [Iowa farmer Erwin Johnson], but it has boosted demand — and prices — for corn at the same time global grain demand is growing.

“And it has linked food and fuel prices just as oil is rising to new records, pulling up the price of anything that can be poured into a gasoline tank. ‘The price of grain is now directly tied to the price of oil,’ says Lester Brown, president of Earth Policy Institute, a Washington research group. ‘We used to have a grain economy and a fuel economy. But now they’re beginning to fuse.’”

Mr. Mufson explained that, “Not everyone thinks it’s fantastic. People who use corn to feed cattle, hogs and chickens are being squeezed by high corn prices. On Monday, Tyson Foods reported its first loss in six quarters and said that its corn and soybean costs would increase by $600 million this year. Those who are able, such as egg producers, are passing those high corn costs along to consumers. The wholesale price of eggs in the first quarter soared 40 percent from a year earlier, according to the Agriculture Department. Meanwhile, retail prices of countless food items, from cereal to sodas to salad dressing, are being nudged upward by more expensive ingredients such as corn syrup and cornstarch.

“Rising food prices have given Congress and the White House a sudden case of legislative indigestion. In 2005, the Republican-led Congress and President Bush backed a bill that required widespread ethanol use in motor fuels. Just four months ago, the Democratic-led Congress passed and Bush signed energy legislation that boosted the mandate for minimum corn-based ethanol use to 15 billion gallons, about 10 percent of motor fuel, by 2015. It was one of the most popular parts of the bill, appealing to farm-state lawmakers and to those worried about energy security and eager to substitute a home-grown energy source for a portion of U.S. petroleum imports. To help things along, motor-fuel blenders receive a 51 cent subsidy for every gallon of corn-based ethanol used through the end of 2010; this year, production could reach 8 billion gallons.”

The comprehensive and very informative article concluded by noting that, “Meanwhile in Iowa, he is tilling his own soil more often, a farming trend that dismays climate experts. Usually Johnson doesn’t till his soil in the fall; he points to short remnants of cornstalks that still stand in rows where soybeans will be inserted. But Johnson plans to till a piece of land where he will plant corn for a second year in a row.

“Johnson also owns a small piece of land that is part of the federal government’s conservation reserve program, which pays farmers for leaving land vacant. Millions of acres are in the program. The CRP parcels tend to have lower-quality soil, and they attract birds and other wildlife. In the climate-conscious era, they have the added virtue of storing carbon in the soil.

“Johnson put a 10-acre parcel aside years ago and signed a 10-year contract with the government to leave it undisturbed. But the contract is running out, and he’s thinking about planting corn. The CRP contract pays him $170 an acre. Johnson says, ‘I’m making a lot more than that now.’”

For more on the CRP issue, see, “Crops winning out over conservation for some landowners,” by AP writer James MacPherson.

Keith Good