Food Security

Reuters writer Jonathan Lynn reported on Thursday that, “A torrent of anger and disappointment from governments, business lobbies and farmers followed recent new proposals from the World Trade Organization for a deal that would end long-running trade talks.

“But seasoned diplomats cautioned that the rhetoric should be taken with a pinch of salt. They said the revised texts had helped put WTO’s Doha round of negotiations within sight of an agreement.

“‘The more pleased you are, the less pleased you must sound,’ said one diplomat from a major developed country.”

The article noted that, “The chances of a successful deal this year are 60 percent, the WTO’s director general, Pascal Lamy, told the European Parliament on Thursday.

“But nine months of intensive negotiations on agriculture - the critical element to a deal - have whittled away many of the differences in farm trade.”

And later, Mr. Lynn indicated that, “In agriculture, many expressed reservations about the proposals by the WTO ambassador for New Zealand, Crawford Falconer, who is chairman of the farm talks. But the G-20, one of the main coalitions of developing countries, led by Brazil and India, was upbeat.

“‘We now have a clearer picture of possible landing zones,’ the group said in a statement. ‘The G-20 regards your text as a good basis to build on.’”

Andrew Bounds, writing on Friday at the Financial Times Online reported that, “The US has decreased the chances of a world trade deal by continuing big subsidies for farmers, Pascal Lamy, director general of the World Trade Organisation, said yesterday. Mr Lamy said on a visit to Brussels that a farm bill passed last week by Congress was unhelpful. ‘This farm bill is not sending a great signal that the US is serious about reducing trade-distorting subsidies.’ He put the chance of the Doha round’s success at 60 per cent.”

And Reuters writer Jean Luis Arce reported on Sunday that, “World Trade Organization Director-General Pascal Lamy said on Sunday developed and developing nations could still wrap up the Doha round of talks on a global trade deal this year.

“‘I still believe it’s doable this year,’ Lamy told Reuters on the sidelines of a meeting of trade ministers from the 21-member Asia-Pacific Economic Cooperation forum in the southern Peruvian city of Arequipa.

“‘We know how to get there. We need to cross this bridge of agricultural subsidies, industrial tariffs and agricultural tariffs soon, now, because otherwise we will not have enough time to cross this bridge to finish the road.’”

Biofuels

Joshua Boak, writing yesterday at the Chicago Tribune Online, reported that, “When Mark Marquis started building his $180 million ethanol plant along the Illinois River, turning corn into fuel seemed like a license to print money. Ethanol enjoyed the unflinching support of the federal government, making it the preferred alternative to foreign oil.

“But as Marquis Energy recently loaded its first batch of fuel onto a barge, ethanol refiners found themselves facing a vicious backlash.

“Corn climbed past $6 a bushel in the past year, threatening to expose plants to losses as ethanol failed to match that increase. Rising food prices led Congress to consider halting its aggressive promotion of ethanol. And Wall Street is brutally punishing the few publicly traded players, as investments in new refineries begin to slow.

“‘We have a modest margin at this point, enough to stay in business,’ Marquis said. ‘But there’s not enough margin to encourage the construction of any new ethanol plants. The investors want a significant margin, not a modest one.’”

The Tribune article stated that, “Ethanol has arrived at a crossroads, one that will decide which fuels keep the American economy running. Unless ethanol start-ups generate significant returns, the industry could struggle to continue developing a network of refineries and filling stations to effectively challenge a century-old petroleum culture. If there is one common element required for ethanol, hydrogen or electricity to replace oil, it is profitability.”

With respect to ethanol profitability, Reuters news reported on Friday that, “Average profits for distilling U.S. ethanol rose for the week ending May 29 as prices for corn fell while prices for the alternative fuel held strong, analysts said.

“Average ethanol margins rose about 6 cents per gallon to 18 to 28 cents per gallon.

“‘Corn is very volatile right now and ethanol profits are dependent on whether it rises or falls,’ said Cory Garcia, a researcher at Raymond James and Associates in Houston.”

The article indicated that, “The ethanol crush spread rose about 6 cents to 43 cents per gallon, according to Reuters calculations. After conversion costs for making the fuel, including natural gas costs, ethanol producers were averaging about 18 to 28 cents per gallon in profit.

“Ethanol distillers that can sell large amounts of dried distillers grains, an animal feed product left over from the the distilling process, or who eke out more than the average amount of ethanol from a bushel of corn most often get better than average margins.”

Biofuels- Food Security

Thomas Omestad reported on Thursday at U.S. News & World Report Online that, “A gathering of world political and agricultural policy leaders next week in Rome will attempt to point a way out of the perils flowing from a surge in food prices that is impoverishing millions of people and causing public outrage that has rattled some governments.

“And although the United States is the world’s top producer of food and the No. 1 donor of food aid, the way Washington gives that assistance and its promotion of corn-based biofuels will face tough scrutiny at the summit called by the United Nations Food and Agriculture Organization. The meeting may produce a call for policy guidelines on the manufacture of biofuels.”

The article noted that, “The U.S. delegation to the June 3-5 conference will be led by Agriculture Secretary Ed Schafer, who seemed to anticipate some of the expected criticism in remarks made today. ‘The United States contributes more than one half of all the world’s food aid,’ he said, adding that U.S. assistance to at-risk countries would be expanded immediately.”

And later, the U.S. News article added that, “Schafer defended U.S. subsidies and trade protection for corn-based ethanol—a policy that some food analysts and U.N. officials have cited as a factor in shifting productive land away from other crops and pushing up food prices. Schafer played down the impact.”

On Saturday, John W. Miller reported in The Wall Street Journal that, “An agriculture summit in Rome in the coming week promises to turn into a food fight over biofuels.

“Along with some 60 heads of state, the United Nations Food and Agriculture Organization has invited a dozen corporations to the three-day meeting, which starts Tuesday, to talk about how to counter the effects of global food inflation, especially in poor countries.

“The debate is likely to shift toward the impact that government policies are having on the cost and availability of arable land. Governments in Europe and the U.S. encourage farmers to plant crops such as rapeseed and corn by offering subsidies and tax breaks for biofuels.”

The Journal article stated that, “Politicians are taking sides. ‘Diverting around 100 million metric tons of cereals to biofuels has had an impact on food prices,’ FAO Director-General Jacques Diouf told the Reuters news agency this past week. World Bank President Robert Zoellick says lowering U.S. and EU public subsidies for biofuels would deflate food prices. But so far, at least, the EU and U.S. governments are sticking with biofuels, a key plank in their efforts to cut the carbon-dioxide emissions believed to cause global warming and to cut reliance on crude-oil imports.

“‘The problem is rising food and feed demand in Asia,’ EU Agriculture Commissioner Mariann Fischer Boel said in a speech this past week. She argues that only 1% of EU arable land is used to plant biofuels, making the impact on land prices negligible.”

In a related article, Colum Lynch reported in today’s Washington Post that, “U.N. Secretary General Ban Ki-moon will issue an urgent plea to world leaders at a food summit in Rome on Tuesday to immediately suspend trade restrictions, agricultural taxes and other price controls that have helped fuel the highest food prices in 30 years, according to U.N. officials.

“Ban is seeking to prod more than two dozen nations that have imposed such measures in the current crisis to reverse course, saying their actions have driven prices higher. The United Nations will also urge the United States and other nations to consider phasing out subsidies for food-based biofuels — such as ethanol — and to hammer out a pact with poor countries that would reduce agricultural tariffs and subsidies that have harmed poor farmers.

“The immediate goal of the June 3-5 summit will be to secure a massive flow of assistance to the world’s hungriest people and to ensure that subsistence farmers across the globe will have the seeds and fertilizers they need to plant their crops this season. World Bank President Robert B. Zoellick on Thursday announced the lending agency would issue $1.2 billion in financing for agricultural support, including $200 million in grants to help the world’s poorest countries, starting with Djibouti, Haiti and Liberia.”

The Post article explained that, “A World Bank analyst estimated that biofuel production has accounted for 65 percent in the rise of world food prices, while the IMF has concluded that biofuel production is responsible for ‘a significant part of the jump in commodity prices.’

“But the United States has defended the production of biofuels, saying it has driven down oil consumption over the past three years. ‘According to our analysis, the increased biofuels production accounts for only 2 to 3 percent of the overall increase in global food prices,’ said Agriculture Secretary Ed Schafer, who will lead the U.S. delegation in Rome. ‘This is not distorting the global price of food,’ he added. ‘This is how we’re going to create energy independence in this country. And we urge others in the face of this rising price problem with energy to look at alternative means, one of which certainly is biofuels.’”

Philip Brasher, writing in Sunday’s Des Moines Register, noted in part that, “U.S. ethanol producers and farm groups say biofuel production is being unfairly blamed for global increases in food costs. These groups see the Grocery Manufacturers Association, a Washington-based trade group that represents companies such as General Mills and Kraft, behind the international concerns that are being raised about ethanol and food prices.

“‘Some of the international organizations that have looked at this are just looking at the talking points from (the grocery association),’ said Bob Dinneen, president of the Renewable Fuels Association.

“Economists with the International Food Policy Research Institute, a Washington-based analyst funded by governments and foundations, agree that biofuel production is only one of several factors behind the recent food price increases.”

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More specifically on the issue of U.S. food prices, Reuters news reported on Thursday that, “U.S. food prices will rise a stiff 9 percent a year through 2012, the largest increase since 1979 and the result of record-high crop prices, the head of an economic consulting company said on Thursday.

“The projections by Bill Lapp of Advanced Economic Solutions are higher than the latest U.S. Agriculture Department forecast of 5 percent for this year. USDA and Lapp have increased their estimates by 1.5 percentage points since February.

“During a telephone news conference, Lapp said he was completing a new analysis of food and commodity prices. He foresaw average corn prices of $5.25 a bushel through 2012, with wheat around $6.50 and soybeans near $11.

“‘When I do that analysis and look at the relationship between that and food prices, I get a 2008-12 average annual rate of increase in the consumer price index for food of 9.0 percent,’ he said.”

Climate Change

Juliet Eilperin and Steven Mufson reported in yesterday’s Washington Post that, “When the Senate takes up landmark climate legislation this week, its backers can be sure of just one thing: The obstacles they face show how hard it will be to enact a meaningful cap on greenhouse gases — probably under the next administration.

“The next administration, not this one, because even supporters of the complex, extensively negotiated 494-page bill say that there is little chance that it will win Senate approval, less chance that the House will agree on a similar measure and perhaps no chance that President Bush will sign it if it reaches his desk.

“‘In some ways, this is a dress rehearsal for next year, but I still think it will be a useful thing for the Senate and Congress, because at some point we have to deal with it,’ said Sen. Byron L. Dorgan (D-N.D.), who says he has yet to decide how he will vote.”

The Washington Post editorial board indicated today that, “The Senate is scheduled to vote today on a motion to proceed to debate on the Climate Security Act of 2008. Given this nation’s sluggish response to global warming, that will qualify as a big step. The chances of passage this year are worse than 50-50. But the markers being laid for the next president are worth pursuing.”

And, the editorial board at the Los Angeles Times stated today that, “There’s always a new report about global warming, but the one released by the U.S. Department of Agriculture, with its charts on optimal temperatures for soybeans and peanuts, is downright creepy in its detail. This isn’t your usual futuristic fodder, with vague but dire predictions. The USDA report is more frightening because it states matter-of-factly the practical changes in farming, forestry and water that are transforming the landscape now and will do so again over the next few decades.

“The Senate is scheduled to vote this week on a sweeping bill that would require carbon emissions to be slashed 70% by mid-century. Its chances for passage are slim; President Bush opposes it, as he has opposed all meaningful attempts to curb global warming, on the grounds that it would harm the economy. He ought to read the USDA study, along with a similar but more comprehensive report released last week by his science advisors, which specifies the effects of global warming and its very real costs.”

Farm Bill

J. Taylor Rushing reported on Friday at The Hill Online that, “The drama over the farm bill may not be over after all.

“The Senate is likely to take up the full farm bill when it returns because of the confusion surrounding President Bush’s veto of an incomplete version of the bill, Agriculture Committee Chairman Tom Harkin’s office said Friday.

“An aide to the Iowa Democrat said the Senate may vote on the full farm bill sometime after it returns instead of voting only on Title III, which covers trade policy. That section was mistakenly left out of the version of the $300 billion bill sent to President Bush, who issued his veto on May 21.”

The Hill article noted that, “A Senate Democratic leadership source on Friday echoed Harkin’s office, saying that a vote on the full bill is preferable to a vote only on Title III. The source said Republicans have not yet agreed on how to handle the situation. A majority of GOP senators supported the farm bill despite Bush’s veto.

“It is unclear when such a vote would occur. The Senate is already expected to vote on a climate change bill and an energy tax package next week.”

Corey Boles reported in today’s Wall Street Journal that, “In presidential elections, the crucial farm vote has been reliably Republican. This year might be different.”

Mr. Boles explained that, “Agricultural topics such as the recently passed farm bill have been prominent in this year’s election because of rising food prices and concerns that the new interest in ethanol is partly to blame.”

CFTC

Diana B. Henriques reported in Saturday’s New York Times that, “The chief regulator of the nation’s commodity markets will unveil early next week a set of policy changes to address public and political concerns that market malfunctions may be contributing to rising food and energy prices, according to people who have been briefed about the agency’s plans.

“The new regulatory steps will be announced by the Commodity Futures Trading Commission, which oversees exchanges that play a central role in establishing worldwide prices for commodities ranging from corn to crude oil.”