Keith Good: Wilting Corn Crop in Argentina to Impact World Food Prices

    Agricultural Economy

    Reuters writer Hugh Bronstein reported yesterday that, “A three-week drought that parched Argentina’s Pampas farm belt in December is quietly wilting this year’s corn crop estimates for the South American grains powerhouse and will likely nudge world food prices higher.

    “Local traders and analysts have cut their harvest estimates for this season to the 18 million to 25 million tonne range, way under the prediction offered by the farm minister just a month ago of more than 32 million tonnes.

    “Plummeting forecasts in the world’s No. 3 corn supplier will likely support global prices after the U.S. Department of Agriculture last week bucked trade expectations by cutting its forecast for U.S. 2013-14 corn ending stocks.”

    Bloomberg writer Rudy Ruitenberg reported yesterday that, “European Union production of foodstuffs from cheese to poultry to wheat is predicted to climb by 2023 on demand for exports and the manufacturing of biofuels from grains, the 28-nation bloc said.

    “Annual grain output is seen climbing to 316.1 million metric tons in 2023 from 304.3 million tons in 2013, while total meat output is seen rising to 45.5 million tons from 43.7 million tons last year, the EU wrote in an online report.

    “The EU’s grain, meat and dairy industries are all expected to benefit from global demand, according to the report. The EU produces 20 percent of the world’s wheat and pork and accounts for 30 percent of global cheese exports, based on data from the United Nations’ Food & Agriculture Organization.”

    In news developments regarding trade issues, Reuters writer Karl Plume reported earlier this week that, “Beijing’s renewal of expired import certificates of several biotech corn strains last week is an encouraging sign that the United States and China will soon resolve the import dispute over an unapproved corn variety that has caused the rejection of several U.S. corn shipments, U.S. Agriculture Secretary Tom Vilsack said on Monday.

    “‘These were renewals, so it’s not new, but it’s comforting to the companies who had been waiting for quite some time for this,’ Vilsack told reporters at the annual American Farm Bureau Federation convention here.”

    Also with respect to China, Bloomberg News reported yesterday that, “Quarantine inspectors at China’s Qingdao port rejected batches of dried distillers’ grains from the U.S. this week because they contained a banned gene, according to two buyers who had orders blocked. Prices fell.

    “The corn-derived feed ingredient, known as a DDGS, is a by-product of ethanol production. The batches were rejected when officials found they contained the unapproved MIR 162 gene, said the two buyers, who asked not to be identified before an official announcement is made.”

    Meanwhile, Carol E. Lee and Peter Nicholas reported in today’s Wall Street Journal that, “White House officials crafting President Barack Obama’s State of the Union address and his agenda for the year are meeting resistance from congressional Democrats on the thorny issue of free trade.”

    The Journal writers pointed out that, “Asked whether Mr. Obama should mention ‘fast track’ in his speech, Sen. Sherrod Brown (D., Ohio) said in an interview: ‘Yeah, by saying he’s putting it on hold–that’s how he should address it.’

    “The divide puts the administration in a difficult spot because the legislation is key to completing a trade pact with 11 countries around the Pacific Ocean. The agreement, the Trans-Pacific Partnership, would set rules of the road for nations representing almost 40% of the global economy and is central to Mr. Obama’s effort to strengthen economic and other ties with fast-growing Asian countries.

    “Senate Majority Leader Harry Reid (D., Nev.), who has a long record of opposing trade deals, hasn’t offered public support for the legislation. Sen. Barbara Boxer (D., Calif.), asked about trade legislation, said: ‘It’s not on the top of my list of things we ought to do.'”

    And Coral Davenport reported in today’s New York Times that, “The Obama administration is retreating from previous demands of strong international environmental protections in order to reach agreement on a sweeping Pacific trade deal that is a pillar of President Obama’s strategic shift to Asia, according to documents obtained by WikiLeaks, environmentalists and people close to the contentious trade talks.

    “The negotiations over the Trans-Pacific Partnership, which would be one of the world’s biggest trade agreements, have exposed deep rifts over environmental policy between the United States and 11 other Pacific Rim nations. As it stands now, the documents, viewed by The New York Times, show that the disputes could undo key global environmental protections.”

    Farm Bill

    DTN writer Todd Neeley reported yesterday that, “The notion that common Congressional ground already found in the ongoing farm bill saga now could be the sticking point in current negotiations came as a surprise to Sen. Charles Grassley.

    “House Ag Committee ranking member Rep. Collin Peterson, D-Minn., told the Red River Farm Network Monday that farm-program payments are the biggest issue remaining in the farm bill conference talks, even though most headlines on the farm bill impasse center on sticking points in the dairy program. Regional differences remain in various provisions including payment limits, adjusted gross income and a tightening of the actively engaged definition for farmers.

    “Grassley, a Republican from Iowa, is a long-time proponent of tighter payment provisions. He told reporters Tuesday that opponents lack moral ground considering that they already agreed to cuts to food stamps.”

    The DTN article indicated that, “‘I’m at a loss on how the language could somehow be a point of disagreement let alone a threat that could take down the whole bill,’ [Sen. Grassley] said.

    “‘It makes zero sense for non-farmers to continue getting farm payments. There’s a reason opponents don’t want a public conference meeting. I think there’s a pretty good reason because they would not be able to defend their position in public. It’s indefensible to keep open loopholes. It’s plain and simple — all loopholes should be closed.

    “‘This shouldn’t be holding up the whole bill. Why cut food stamps but leave the loophole open for multimillionaires?'”

    Mr. Neeley explained that, “Throughout the negotiations, Sen. Debbie Stabenow, D-Mich., chairman of the Senate Committee on Agriculture, Nutrition and Forestry, has said that she would fight for the Grassley provisions to remain in the final legislation.

    “Some media reports have suggested that Stabenow may be considering compromise on some of the payment limits provisions, instead of holding the line.

    “‘They don’t have the moral authority and she does,’ Grassley said. ‘I’m only going to hold Debbie Stabenow to her word, and she’s kept her word that she’ll fight for this. I can understand Debbie Stabenow being overruled in a small clique behind closed doors. If this is such a big thing to 10% of farmers who get 80% and defend their position, that does not have much moral authority, then let them do it.'”

    Daniel Looker reported yesterday at that, “Grassley has repeatedly called it hypocritical for the ag committees to close some loopholes for food stamp payments while allowing wealthy farm owners to continue receiving commodity payments.”

    Meanwhile, in an update yesterday, Rep. Randy Neugebauer (R., Tex.) indicated that, “Unfortunately, the Farm Bill hasn’t yet been brought to the Farm Bill Conference Committee for a vote yet.  I’m disappointed that we haven’t been able to get this done already, but I’m optimistic that we’re almost at the finish line.  Right now, one of the biggest issues that remains undecided is how we’ll manage dairy programs.  Dairy production is important to Texas–it accounts for about ten percent of agricultural receipts.  And dairy policy has a direct effect on the price you pay in the grocery store for milk, cheese, yogurt, and the entire range of dairy products.

    “The Senate bill would require producers to cut milk production when prices hit a certain level.  That means the government would be determining how much milk they could supply to consumers.  There’s a reason Speaker of the House John Boehner calls it a ‘Soviet style‘ program.  Unfortunately, despite an overwhelming House vote to remove this provision from the Farm Bill, some lawmakers are intent on putting it back in the bill.  Until that’s resolved, we can’t move forward.  So I’m working to keep our market-based reforms in place to support dairy producers and keep milk affordable for Texas families.”

    Ana Radelat reported yesterday at the Connecticut Mirror (Hartford, Conn.) Online that, “Rep. Joe Courtney and the state’s dairy farmers are in a pitched battle with the most powerful member of the House of Representatives, Speaker John Boehner, a fight that has stalled the farm bill and whose outcome is likely to affect the price of milk across the country.

    “‘Speaker Boehner, in my opinion, is interjecting his own special interests agenda to the detriment of the farm industry and rural American as a whole,’ Courtney said.”

    The article stated that, “Courtney calls Boehner’s criticism of the plan ‘ludicrous.’

    “‘There ought to be some mechanism so factory farms don’t overproduce,’ he said.”

    Yesterday’s update also noted that, “Courtney accuses Boehner of ‘carrying water for processors who are looking for the cheapest price for milk.’

    “Kroger, a huge grocery store change that processes milk into milk products, is located in Boehner’s district. Ohio is also home to ice cream and yogurt makers — Dannon has a big facility in that state.”

    In other developments, an update yesterday at the Red River Farm Network Online reported that, “If and when the farm bill passes, it will cut more than $20 million in costs. Brandon Willis, Administrator of the Risk Management Agency, says crop insurance is the only title that will see a significant increase in spending. ‘I think it’s a recognition that crop insurance is the lynch pin of the safety net. I think a lot of the reason is farmers have skin in the game. They understand that farmers put a lot at risk. That’s certainly the program they’re moving toward, is crop insurance.’ Willis says farmers will need to do their homework before they get involved. He says crop insurance provides a much better safety net than it did 25 years ago. ‘This is a program where a farmer who wants to enroll, has to go see a crop insurance agent, just like they would for car insurance, like they would for homeowners insurance, long before they plant a crop. When they do that, they need to pay a premium for the crop insurance policy. They only get a payment from crop insurance if they suffer natural disaster. I think if everybody understood just how market oriented the program is, I think people would appreciate this program more than they do.'”

    And the “Washington Insider” section of DTN noted yesterday (link requires subscription) that, “As farm bill conference committee negotiators enter another week of discussions in pursuit of the bill Congress has sought for over two years, it is becoming ever more likely that another extension of the 2008 farm law will become necessary.

    “Rep. Frank Lucas, R-Okla., and Sen. Debbie Stabenow, D-Mich., the heads of the House and Senate Agriculture committees, respectively, continue to express optimism that things will fall into place in the near term and the conference committee will emerge with a compromise bill that both chambers will accept. Others are not as certain.

    “Both the House and Senate will take a one-week recess beginning at the close of business on Thursday. Staff-level work likely will continue during the recess, but it is becoming less likely that the promised compromise farm legislation will emerge from the conference committee before Punxsutawney Phil emerges from his burrow on Feb. 2.”

    Also, Reuters news reported today that, “Brazilian cotton producers visiting Washington were pessimistic that the U.S. Congress would finish wrangling over farm policy in time to comply with international rules on cotton subsidies and avoid trade sanctions on U.S. exports to Brazil.”

    The article added that, “The farm bill is already more than a year overdue and Brazilian cotton producers said after visits to Capitol Hill this week they were not reassured that the legislation, which could pass this month, would comply with WTO rules against trade-distorting subsidies.

    “‘In visits to Congress we have not yet seen sufficient effort to make the new farm bill comply,’ Gilson Pinesso, president of the Brazilian Cotton Growers Association (ABRAPA), told reporters on Tuesday.

    “Although Brazil’s growers want to resolve the dispute amicably, sanctions were looming if the farm bill did not pass soon or failed to meet WTO rules, a concern which has also been raised by U.S. business groups.”

    David Rogers reported yesterday at Politico that, “Trying to save itself, can the farm bill help save the West?

    “That’s the intriguing question raised by a proposal Tuesday by House Republican leaders to use the farm bill as a lifeline for Western towns and counties surrounded by vast stretches of tax-exempt federal lands.

    “The Interior Department now distributes about $400 million annually to 1,900 such local governments under a program known as PILT or Payments-in-lieu-of-taxes. But PILT’s funding authorization has expired with no clear replacement ahead.”

    Mr. Rogers noted that, “Enter the farm bill. Many days it seems to need a lifeline itself, but the current draft is expected to generate in the range of $25 billion in 10-year savings from changes in commodity and nutrition programs.

    “Until recently, Western officials were flooding the Capitol with faxes and asking to be included in the $1.1 trillion omnibus spending bill before Congress. But PILT’s cost was too big to be easily absorbed at a time when the Appropriations Committees were already straining to provide additional funding to fight forest fires in some of the same states.

    “When the omnibus was rolled out Monday night and no PILT dollars were in it, that provoked some angst. Even such tea party fiscal conservatives as Sen. Mike Lee of Utah, a state which gets about $35 million from PILT, took the Senate floor to protest loudly Tuesday.”

    The Politico article stated that, “Across the Capitol, the GOP leadership called in disgruntled Westerners knowing the House would be voting Wednesday on the omnibus. In that meeting, the idea of adding language to the farm bill was offered up.”


    Lisa Mascaro reported yesterday at the Los Angeles Times Online that, “A $1-trillion spending bill was headed for swift approval in the House by Wednesday, but legislation to extend unemployment insurance stalled in the Senate amid partisan bickering, dashing hopes for a quick deal to resume jobless benefits.

    “Though negotiations continue, it appears increasingly unlikely that a compromise will be reached quickly to help the more than 1.4 million Americans who have been cut off from their unemployment benefits. An additional 72,000 Americans lose their insurance every week.”

    The article noted that, “The budget package, by contrast, is emerging as a rare example of cooperation in the otherwise stalemated Congress, with passage likely in both chambers by the end of the week.

    “The House on Tuesday approved a stopgap measure that would fund the government until midnight Saturday, giving lawmakers a few extra days beyond Wednesday’s deadline to jump through the procedural hoops needed before a final vote can be taken.”

    Ed O’Keefe reported in today’s Washington Post that, “The first votes on the $1.1 trillion spending plan, are expected Wednesday, less than 48 hours after negotiators introduced the 1,582-page spending agreement to fund government operations for the rest of the fiscal year. The House is scheduled to vote on the measure Wednesday, and the Senate plans to vote on it at noon Wednesday.”

    Political Notes

    Jake Sherman and Alex Isenstadt reported yesterday at Politico that, “Democratic Rep. Bill Owens of New York will not run for reelection in November, he announced Tuesday — dealing another blow to the party’s prospects of winning control of the House.”

    Rep. Owens formerly served on the Agriculture Committee.

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