Ag Policy Update–13 Mar 03       

 

1.      Let’s start with the economy.  Seeing any signs of improvement?  

–Few and far between.

–the trade deficit narrowed last month, after months of increases and a record deficit for 2002.

–the dollar is up relative to the yen and down relative to the euro, which could be viewed as both good and bad news.

–Most of the news is negative, leading to renewed talk of more interest rate cuts to stave off any possibility of recession.

 

2.      Briefly run down some of these adverse reports.  

–Feb retail sales fell 1.6%, their worst 9/11 15 months ago.

–Unemployment rose to 5.8% and over 300,000 jobs were lost in the economy last month

–Oil prices are up, and greater than expected.

–Estimates of the federal budget deficit for both the short and long terms continue to be revised upward.

–Mortgage rates are at a new low.

–Consumer confidence is down.

–The Stock Market is not recovering.

–The cost of recent winter storms is mounting.

–States continue to have problems dealing with shortfalls in revenue.  


3.      We’ve talked in the past several weeks that much of this economic weakness is a result of war jitters.  With the President indicating that war is more likely and soon, what kind of impacts should US ag be concerned about?  

–Let’s look at ag markets first:

–Egypt is our #2 wheat customer, and #11 for all ag exports

–the Mideast is 5th leading market for wheat flour, 6th for all ag exports, and 8th for US wheat purchases.  

–Oil prices will increase, at least during the war.

 

 

4.      What about market and political stability around the world?  

–Analysts are suggesting concern with political destabilization for

–Pakistan, Malaysia, Indonesia, the Philippines, Afghanistan, some of Africa with large Muslim populations, Saudi Arabia, Egypt, Jordan, and Turkey

–Japan may suffer economically because of dependence on foreign oil

–The weakening of relations with and within these countries/organizations is also of concern:

–Great Britain, France, Germany, Russia, China, NATO, EC, UN


5.      You noted the increasing chances for a recession.  How does this interact with other war-related economic concerns?  

–The budget deficit, growing larger, doesn’t yet include the cost of a war and the subsequent peacekeeping effort.

–The likelihood of airline bankruptcies is increasing.

–The cost to buy support from other countries is increasing, both in terms of dollars and market breaks.

–As I’ve noted before, many analysts suggest that a war will increase animosity of Muslims and others against the US, and this could increase terrorist activity that will disrupt markets.

–The private sector is already shying away from insurance coverage for such acts.

 

6.      You mentioned the deficit.  CBO has provided a list of possible programs Congress could cut to improve the budget deficit.  What are they saying?  

–Tighter limits on farm program payments

–Elimination of Market Access Program & Foreign Market Development Program

–Cut the reimbursement rate to private insurance companies for crop insurance

–Increase federal lands grazing fees

–User fees for FSIS

–Reduce/eliminate some food stamp benefits

–Target child nutrition programs to cut costs


7.      Remind us again of some important pending deadlines:  

–12 Mar was the final date for public comment on EQIP

–20 Mar: final date to purchase crop insurance

–20 Mar: final date for public comment on CSP

–20 Mar: final date to submit testimony to Ag Appropriations Subcommittee on fy04 budget

–April 1: final date to select base and yield options in commodity support programs

–Mar 31: deadline to request LDP or loan for wool & mohair

–Mar 31: deadline for peanut producers to designate base/yield to farm/farms

–June 2: complete signup for direct and counter-cyclical commodity support programs

 

8.      Other farm bill programs involved in signup?  

–Milk Income Loss Contract signup continues

–Farmable Wetlands Pilot Program signup continues

–Farm Storage Facility Loan Program signup continues

–Conservation Reserve Program signup continues  


9.      What about the disaster assistance that was recently approved by Congress?  

–The Livestock Compensation Program open for signup 1 Apr. All 77 OK counties are eligible.

–The other programs are tentatively scheduled to begin signup in late June.

–Producers will, however, want to begin thinking about whether to apply for 2001 or 2002.  


10.   Congress:

a.     Recent activity:

–Congress continues work on the FY04 budget  

b.     Current/upcoming:

–awaiting further input or decision on war with Iraq

–Senate Ag Committee hearing on nomination of Vernon Parker as USDA Assistant Secretary of Civil Rights (20 Mar)

–Senate Ag Committee reviews child nutrition programs (26 Mar)  

c.     2003 schedule:

–to be announced  

d.     Key issues not completed

–work on the fy04 budget

–Healthcare reform

–Prescription drug benefits

–Merger activities, especially in agriculture

–Response to economic slump

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

–Restoration of full CSP funding

  

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