25 July 01 
(Sunup Program to be aired  26July)  

1.                  The House Ag Committee continues work on its draft of farm bill proposals.  We summarized the House ideas last week.  Who wins and who loses?

–Let’s follow the money first, remembering these ideas have a long way to go before becoming reality.

–It you’re a producer or landowner that’s been receiving flex payments and supplemental aid, expect to be on the list to receive close to what you’ve averaged over the past 4-5 years.

–So, if you’ve been generally satisfied with what you have been getting from Uncle Sam, you’ll probably be pleased with the House draft plan, especially since you won’t have to wonder each year prices are down whether extra aid will be forthcoming.

–However, if you are a producer that has been frustrated about the lack of government support, or you see your neighbor who is no longer actively farming getting as much or more than you, this plan is more of the same & you won’t be happy.

–Generally, landowners and larger farms will benefit, while beginning producers and renters will lose.

 

2.         What can you say about the House draft plan from your perspective as a policy economist?

–Well, there are several problems areas that raise red flags.

–First is the issue of the counter-cyclical payments. 

–It is true that it was worrisome to producers in need and a hassle for Congress to deal with ad hoc emergency funding every year.

–The problem is that once these become permanent expected payments, it is more likely they will be capitalized into the value of the land.

–This will make property more expensive for new buyers, and possibly increase rental rates.

–Another concern is that the plan pays producers for higher yields when prices are low, and doesn’t pay supplemental payments when yields are low and prices are high.

–As our associate Dr. Mike Dicks has pointed out, this is especially problematic for Oklahoma wheat producers because there is more yield variability here than with Midwest feedgrains.

–So Congress will be left with the option to do nothing for our producers or come through with disaster assistance when yields are low and prices are ok.

3.         Those are real concerns.  What else troubles you with the plan?

 –Another concern is the issue of targeting, although there is more debate about whether payments should be targeted and to whom.

–There are few practical solutions to this issue, but the fact remains that the current and proposed provisions give payments to some people who are not actively engaged in farming, and at least 60% of payments go to the top income producers.

–A Midwestern economist, Michael Duffy, earlier suggested to the Committee that it should consider changing from the commodity focus of existing programs and shifting to a people focus by offering a type of direct payment such as a minimum wage to farmers who actually farm.

–Another problem to free marketeers is with the apparent admission that US agriculture can’t make it with market-oriented policy, but admits its dependence on government support.

–There is also the not insignificant concern that the commodity payments may not pass WTO muster. 

–How this is to be dealt with is anyone’s guess.

–Another concern is that there is nothing in the proposal about the perceived merger mania of agribusiness.

–Some contend that this is not an issue for the farm bill.

–However, to ignore it altogether can’t help but raise eyebrows.

 

4.         Sounds like a pretty negative view of the House draft plan.  Any favorable views you might have?

–Well, I think their admission that the 1996 act did not work as expected is probably correct.  So there is still hope they may find some positive solutions.

–Their suggestion to increase the cap for CRP may have some merit for some farm areas with environmentally-sensitive, marginal land that hasn’t yet made it into the program.

–However, they may want to be concerned about the adverse impacts of a high percentage of idled acreage on the business community in the county.

–The fact that the Committee seems to want to stick with making payments through the existing payment roles does have the advantage of allowing easier and faster distribution of payments.

–Additionally, producers and lenders can rely on the approximate level of the target price to plan expected receipts, reducing downside surprises.

 

5.         Is the House still on track to have the farm bill written by the first week of August?

–By this time next week, there will be an announcement that they have done, or about to do just that.

–But, as viewers know, things are not always what they seem in Washington.

–There’s the deal and the real deal.

–The real agenda is to meet the requirement to report a bill out that spends the targeted amount.

–Ongoing work to get a floor vote, the work of a Senate Ag Committee plan that is at least a month behind, and the eventual conference committee compromises guarantee that there will be significant changes.

–Some of the Committee members know this and aren’t too concerned about passing a bill that is not what they’d prefer.

–Odds continue to be in favor of a 2002 farm bill, as originally planned, and it will be different than the draft plan currently in the House Ag Committee.

 

6.         In any event, Congress adjourns for its summer recess 4 Aug.   Any other ag-related issues coming up this week?

–It is unlikely that much significant will occur.

–While it is true that Congress will have only have 27 weekdays until the targeted adjournment date of 5 Oct, most reps prefer to get feedback back home before final decisions are made.

–The Senate Ag Committee will consider the package to provide emergency aid to farmers.

–Viewers may recall that the House has already approved $5.5 billion, as requested by Bush, but only $4.5 billion is earmarked for producer payments.

–Harkin has indicated that he may increase this by $1 billion.

–If this pushes the package to $6.5 billion, Bush could be faced with a veto that few producers want.

–House Speaker Hastert wants to have a vote on Trade Promotion Authority but doesn’t yet think the votes are there.

7.         Let’s shift gears to the general economy.  Fed Chair Greenspan spoke again to Congress this week.  Any clues about his perception of the state of the economy and whether we can expect further interest rate cuts?

–While he sees some signs that the economy has bottomed out and is rebounding in some areas, he continues to be concerned.

–Many analysts interpret this testimony as an indication there will be another cut in interest rates at their next meeting.

–What the economy does in the next few weeks will provide more insight on their decision.

 

8.         Lots going on in Europe this past week with the President meeting with world leaders in Italy and Administration officials sitting on the sidelines in Germany.  What does this mean for agriculture?

–Bush continued to push for a continued WTO negotiation and expanding global markets.

–That will likely bode well for US agriculture in general.

–The talks in Germany were another story.

–World leaders were attempting to salvage the Kyoto Global Warming Agreement in light of Bush’s announced withdrawal from the process.

–Some would say it was embarrassing that most of the world found a way to compromise on a very serious issue with the absence of leadership by the US.

–US multinational corporations may find themselves forced to play by rules that the US could have had some say in if they hadn’t given up a seat at the table.

–US farmers and foresters may find a loss of opportunities for such practices as subsidized conservation tillage and forest production that could sequester carbon.

9.         USDA just released numbers to show that ag trade is up.  What can you tell us?

 –US ag surplus for fy 2001 is about $2 billion ahead of fy 2000.

–The total is about $10 billion for Oct-May.

–Exports of high-value products are driving the gain.

–Wheat sales are down in volume but up in value.

–Egypt, Japan and Mexico remain our best customers of wheat.

–To date in this fiscal year, the US has exported about $36.6 billion in ag trade, and imported about $26.4 billion.

10.            Congress:

a.            Recent/Current:

–House Ag Committee public hearings on “Draft Farm Bill Concept Paper”

–17 Jul

–18 Jul

–19 Jul

–House Ag Committee reviews farm policy w/Secretary Veneman (24 Jul)

–Senate Ag Committee continues hearing on next farm bill w/focus on wheat, rice, sugar & peanuts (17 Jul)

–Senate Ag Committee continues hearing on next farm bill w/focus on nutrition (19 Jul)

–Senate Ag Committee hearing on next farm bill w/focus on livestock issues (24 Jul)

 

b.            Upcoming:

–House Ag Committee public hearings on “Draft Farm Bill Concept Paper” continue

–26 Jul

–27 Jul (tentative)

–30 Jul (tentative)

–31 Jul (tentative)

–Senate Ag Committee hearing to consider the nominations of Hilda Gay Legg to be Administrator for the Rural Utilities Service, USDA, & Mark Edward Rey to be Under Secretary of Agriculture for Natural Resources and environment and also to be a member of the Board of Directors of the Commodity Credit Corporation (26 Jul).

–Senate Ag Committee continues hearings on next farm bill (dates to be announced)

 

c.            Congressional Calendar:

--As of 30 Jul, about 27 weekdays remain in this Congressional session. 

 

                    August 4 - Sep 4                      Summer District Work Period

                    September 3                 Labor Day

                    September 18               Rosh Hashanah

                    September 27               Yom Kippur

                    October 5                                Target Adjournment

 

d.         Key issues for this session of 107th Congress include:

–completing/continuing progress on the next farm bill

--dealing w/Social Security, Medicare, Medicaid

–consider debt reduction & appropriations bills

–campaign finance reform

–education reform

–prescription assistance

–moratoria on mergers in agribusiness

–farm income emergency aid

–Endangered Species Act reform

–energy policy reform

–Trade Promotion Authority (TPA–formerly Trade Negotiating Authority TNA, formerly fast track authority FTA)

 

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