Ag Policy Update-20 Nov 02       

(Sunup Program to be aired 21 Nov 02)

 

1.     Congress wrapped up business this week with passage of the Homeland Security bill.  What’s the impact on agriculture?

 

-In general it may result added security to our food and fiber system, but that’s at least months away.

-USDA functions that will be moved into the new department include parts of APHIS and Plum Island Animal Disease Center.

-There are also provisions to improve communication channels among all federal agencies with respect to security issues. 

-In more specific terms, the new department will become a magnet for federal funds at a time when the federal budget deficit is increasing.

-This could make it more difficult in the future when ag needs compete for scarce funds. 

-It is also likely that there will be future requests to expand the scope of the new department, possibly shifting more agency responsibility from USDA to DHS.

 

 

2.     The House went home last week, and the Senate wrapped up this week.  What was left undone by the lame duck Congress?

 

-The remaining 11 spending bills were left for the new Congress next year.

-A 7^th CR was passed to extend current budget authority to 11 Jan.

-Recall that, prior to the election, Congress passed the Defense and Military Construction spending bills, and sent them to the President for his signature. 

-Until the Agriculture Appropriations bill is passed, no appropriated spending on new programs can occur.

-Disaster aid was not passed, although some say it is still likely early next year.

-Other important issues left unfinished include:

-Economic aid with the economy in a slump, including consideration of accelerating out-year tax breaks and making the elimination of the estate tax permanent

-Prescription drug benefits

-Energy reform policy

 

 

3.     You mentioned the economy.  Fed Chair Greenspan discussed the state of the economy this week.  Summarize his concerns and what that means for ag.

 

-This was his second public statement within a week.

-Last week, he noted that the economy had Ahit a soft patch@, which with the Fed’s recent decision to drop interest rates a half point are about as serious as he can get without sounding alarmist about a possible recession.

-He blames current woes on:

(1)    after effects of falling stock prices;

(2)    increasing fall out of corporate scandals;

(3)    growing geo-political risk related to Iraq.

-This week, he attempted to be more upbeat, praising the ability of markets to survive shocks to the system.

-He reiterated his support for market capitalism with limited regulation.

-He also expressed concern over unspecified structural rigidities that limit market corrections.

-As I’ve noted in the past few weeks, however, there’s more to it than that:

-Leading Economic Indicators are down.

-Jobless numbers are up.

-The Federal budget deficit is worsening.

-Retail sales are up slightly, but still weak.

-Manufacturing has been contracting.

-Firms are projecting more hiring early next year.

-Housing construction is down.

-Talk of war and fears of layoffs continue to weaken consumer confidence. 

-The Fed action will reduce the cost of some borrowed capital in the short run, but it also reduces the value of the wealth base.

-Also, it may improve consumer confidence which could strengthen demand for goods and services.

-Since most farm families now rely on off-farm income, this could bring some optimism.

 

 

4.     Checks are again going to producers from FSA.

 

-New farm program payments began recently, with $685 million planned. 

-Funds are being disbursed through the Direct and Counter-Cyclical programs and the Apple Marketing Loss Assistance program.

-Cotton gets the lion’s share with about $430 million going for the first partial counter-cyclical payments.

-Recall that, because of high market prices, no counter-cyclical payment will go to wheat, feed grains or soybeans.

 

5.     There has been some movement on trade talks in recent weeks.  What’s the latest?

 

-Both the FTAA and WTO talks are moving forward. 

-FTAA represents 34 democratic countries in Western Hemisphere, excluding Cuba.

-This month’s Quito meeting set a negotiation schedule to complete agreement by 1 Jan 05.

-US & Brazil will co-chair the negotiations.

-Minister meetings were set for  Miami in late 2003, and  Brazil in 2004.

-Trade Negotiating Committee meetings are set for 2003 in Trinidad/Tobago, El Salvador & Mexico. 

-Agriculture will want to watch these negotiations very carefully.

-While trade with Central and South America is not very significant, we have a deficit in ag trade with these countries.

-Currently, the US buys more than twice as much ag goods from Central and South America than we sell to them.

-Interestingly, many of those countries see agriculture as the major obstacle in crafting an agreement, in part because of their concerns over the level of US support for the ag sector.

 

 

6.     Other policy-related news/activities:

 

a.  We’ll provide an update on WTO, the progress on US-Singapore FTA, and pending trade talks with Australia in the coming weeks.

b.    Election turnout rates and margins are coming out.  Details will be discussed in the coming weeks.

c.    The peanut quota buyout signup period has been extended.  It was set to end 22 Nov, but has been pushed to 15 Jan 03.  Contact your local FSA for more information.

d.    Secretary Veneman has suggested USDA’s wish list for Congressional action next year.  These include:

        --trade policy support

        --tax relief

        --energy reform including support for RFS & biofuels

        --conservation

        --nutrition program reauthorization

e.   USDA took several dairy program actions this week, including:

        --applying the volume-based WTO safeguard duty to above-quota imports of American-type cheese

        --to improve the balance of butter and nonfat dry milk, CCC will increase the price it pays for butter to $1.05/lb

        --a second allocation under DEIP making available more nonfat dry milk, butterfat and cheeses

 

 

7.     Congress:

 

a.     Recent activity:

-The House adjourned last week after passing the Homeland Security bill. 

b.     Current/upcoming:

- The Senate passed the Homeland Security bill and adjourned this week.

c.     2002/03 schedule:

-Recess for orientation for newly-elected reps, and organizing leadership for start of 108^th Congress in January. 

d.     Key issues not completed

-11 of the 13 FY03 spending bills

-Healthcare reform

-Prescription drug benefits

-Merger activities, especially in agriculture

-Emergency assistance for agriculture

-Response to economic slump

-Comprehensive energy legislation (& status of renewable fuel standards)

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