19  September 01 
(Sunup Program to be aired 20 September 01)  

1.                  A week after the horrible terrorist attacks.  Our thoughts are on the families of the victims and what happens next.  Any new thoughts on what changes lie ahead for agriculture and agricultural policy?

–As we noted last week, it is unlikely that there will be a 2001 farm act.
–As we collectively get past the numbness and define a new meaning for “normal”, questions are being asked about:
–disruptions in markets,
–shifting of government funds to defense and security,
–economic weakness,
–shortages of labor if we mobilize for war.

2.                  Let’s talk about some of those questions.  What about disruptions in markets?

–There was some concern as we re-opened the markets this week, but exchange markets & banks in NY seem to be working, although the stock market is down 8-10%.
–Grain trade with certain countries faces uncertainty
–Congress renewed the act to exclude food & medicine in any sanctions on rogue/terrorist states.
–Unfriendly countries may yet choose to business with non-US sources.
–The geographic zone of Afghanistan & surrounding countries that have some sympathy with that country’s leadership is where our focus will be over the coming months:

Afghanistan            $5 mil.*
Pakistan                 $93.4 mil*
Iran                          $52.2 mil
Iraq                          $102.5 mil
Saudi Arabia         $506.7 mil
Qatar                      $9 mil
UAE                        $206 mil
Oman                      $16.6 mil
Tajikistan                $6.1 mil
Kyrgistan                $13.3 mil*
Turkmenistan         $2.3 mil
Uzbekistan             $6.5 mil
Yemen                    $96.2 mil
Jordan                    $102.5*
Syria                       $79.6
Libya                       $1.7
* denotes primarily wheat sales

--Disruption of markets will have some impact on us.

3.                  What about government spending & how that will affect agriculture?

–We’ve seen Congress send legislation to the President for emergency spending for the attacked areas.
–There will also likely be legislation for funding support of affected businesses & industries, such as the airlines.
–Defense spending, airport security, security for other public transit systems will also be forthcoming.
–This will dry up much of the additional funds that were being discussed for agriculture.

4.                  What about those economic concerns.  What can we say?

–For weeks, we’ve been tracking the economic downturn.
–There’s no recesssion yet, but economic growth has basically come to a standstill.
–As we noted last week, investors and businesses are regrouping and considering short term risks.
–Early signs suggest that the dollar will weaken as confidence declines.
–There are no indications yet that oil markets will be disrupted, but they bear watching.
–Consumer spending, a major reason that the economy has been as strong as it has, could weaken as consumers become more cautious.
–Investors often shift to gold during periods of crisis; if this occurs, that means less investment dollars in active business concerns.
–The Fed dropped interest rates another half percent.
–But, as noted here in the past few weeks, we have a dilemma in responding to the economic crisis, because the Fed doesn’t have too much more room to lower interest rates.
–I don’t think there’s a reason for financial panic.
–However, the odds have increased for continued economic weakness, possibly turning into a recession.
–I also think that some folks are underestimating the power of Keynesian economics: there are times when expanded government spending will boost an economy.

5.                  Secretary Veneman had planned to tell the Senate Ag Committee today what the Administration views are on the next farm bill. However, we understand the Committee has postponed the hearing.  What was she planning to say?

–USDA issued a 120 page book that outlines a broad set of principles that are hard to argue with.
–Details don’t seem to be there.
–The outlined principles include support for ]
–expanding trade
–learn from the past lessons that government intervention distorts markets
–provide a market-oriented safety net
–broaden the infrastructure for ag
–stress safe food and the use of sound science
–sustain environment, while allowing flexibility for emerging needs
–recognize the diversity & needs of rural communities
–commitment to national nutrition safety net
–support collaboration, coordination and integration of programs.
–House Ag Committee Chair Combest said he saw the statements as consistent with the House farm bill proposals.
–Harkin of the Senate could say the same thing, but have a very different approach than Combest.

6.                  There were also stories over the past few weeks on the distribution of farm program money.  What’s this do to farm bill talks?

–We’ve been talking over the summer about the fact that the top income land owners get most of the AMTA payments.
–The Associated Press and the Environmental Working Group released reviews of USDA data that indicate the top 10 % of participating farm owners got 63% of the payments this past year, many getting far more than what payment limits seem to call for.
–There’s no indication that these corporations and individuals did anything illegal.
–But, this kind of publicity could fuel a backlash.
–Whether such a backlash could result in calls for targeting payments, or even reductions in farm program funding remains to be seen.

7.                  What else can we expect Congress to work on?

–Congress must work through the 13 spending bills as quickly as possible.  Here are numbers that indicate the task ahead of them:
–0 have been passed by Congress nor sent to the President;
–9 have passed the House;
–6 have passed the Senate;
–1 Oct begins the new fiscal year.
–5 Oct was the targeted adjournment date for the House.
-- Congress won’t likely meet those deadlines, but will pass short-term supplementals, and likely be in session until late Oct or mid-Nov.
–The President’s energy bill will be considered.
–The request to grant the President Trade Promotion Authority (TPA), formerly fast-track may be discussed.
–This allows the Administration to negotiate trade agreements that Congress can’t modify or amend.
–Other issues may include:
–completing/continuing progress on the next farm bill
--dealing w/Social Security, Medicare, Medicaid
–campaign finance reform
–education reform
–prescription assistance
–moratoria on mergers in agribusiness
–Endangered Species Act reform

8.                  On the trade front, China and the WTO have finally reached agreement on membership?

–That’s right.
–The WTO Working Group finally announced that China is cleared for membership.
–Acceptance will be approved at a mid-November WTO ministerial meeting. 
–By December or early 2002, China will formally become a member of WTO.
–Regardless of how people feel about this decision, China is likely to be the world’s largest economy by 2025.
–For this reason alone, many believe it is better to bring them in to the disciplines of WTO.

9.                  Other ag policy-related news/events:

1.                  USDA awarded $6 to educational/community institutions to help minority farmers, including $276,000 to Langston University, Ok.
2.                  Secretary Veneman has selected:

–James Butler, TAMU, as new deputy undersecretary for Marketing & regulatory programs.
–AJ Yates, California, as AMS administrator.

3.                  USDA has imposed import restrictions on Japanese ruminants/products after finding a suspected BSE (mad cow disease) case in Japan.

4.                  USDA approved $10 million in rural development grants for economic growth in 21 states, including $500,000 to Oklahoma.

10.            Congress:

a.            Recent/Current:

–Primary focus on spending bills and terrorist attack response

b.            Upcoming:

–Senate Ag Committee continues hearings on next farm bill
–20 Sep–POSTPONED
–House Floor tentatively scheduled to take up the House Ag Committee version of the next farm bill (HR 2646)–POSTPONED.

c.            Congressional Calendar:

–As of 24 Sep, about 10 weekdays remain in this Congressional session, if the House target adjournment date is met. 

                    September 27               Yom Kippur

                    October 5                                Target Adjournment (for the House)

 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
–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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