A panel of commodity leaders told several members of a farm bill committee that reducing domestic support for U.S. agriculture while WTO talks are still under way would hamstring U.S. ability to negotiate in the WTO from a position of strength. They say that current components of the support program should remain as a bargaining chip for securing market access, and that market access should compensate for any loss of the support.
The panel also painted a picture of the harsh economic conditions facing U.S. agriculture today. “Even with a safety net in place, much higher production costs, in particular for fuel and fertilizer, have reduced and will continue to reduce rice profitability far below levels previously expected,” said Kennett, Mo., rice producer Paul Combs, speaking for the U.S. rice industry.
The hearing was held in front of a sparse crowd on the campus of Southeast State University in Cape Girardeau, one of several to be held prior to the writing of the next farm bill. Committee members included Sens. Saxby Chambliss, R-Ga., Jim Talent, R-Mo., and Blanche Lincoln, D-Ark., and Rep. Jo Ann Emerson, R-Mo. Commodity groups at the hearing represented cotton, rice, corn, soybeans, wheat and grain sorghum.
National Cotton Council president Allen Helms acknowledged that budget constraints, WTO negotiations and negative public opinion of domestic support for agriculture are strong forces shaping the next farm bill debate. But agriculture can't give up too much, too soon, he says.
“Doha negotiations are isolating U.S. agriculture and U.S. cotton in particular,” said the Clarkedale, Ark., cotton producer. “Our trading partners have clearly ‘pocketed’ the generous U.S. offer on reductions in domestic supports and refused to make an adequate response on market access.
“Cotton has already given more than any other commodity in these negotiations. The Step 2 program has been eliminated, the subsidy component has been removed from the Export Credit programs and in Hong Kong, least-developed countries were assured of receiving duty-free, quota-free access to the U.S. raw cotton market as soon as an agreement is reached. An agreement that singles out U.S. cotton for even more inequitable treatment will not earn the support of U.S. cotton producers.
“If current trade negotiations are suspended, we would strongly support an extension of current law,” Helms added. “This will ensure that when negotiations resume, the United States will be able to negotiate from a position of strength. We also know, however, that maintaining existing policy will face hurdles, both domestically and internationally.”
Combs gave several reasons for extending the 2002 farm act until a final WTO agreement is in place, noting, “Any reduction of the current programs and spending levels of the farm bill will result in the effect of ‘unilateral disarmament’ by the United States and ultimately weaken our negotiating position with other countries.
“Writing a new farm bill in advance of a final WTO agreement could result in a very short-term bill that must be rewritten should the WTO negotiations be concluded and new trade rules are in place. Multiple farm bill authorizations in a short timeframe will weaken the predictability and stability that are key components of any effective farm safety net. Any changes that inject uncertainty into this safety net will lead to financing difficulties.”
The current farm bill “is a fiscally responsible approach to farm policy and provides a safety net when needed. As such, congressional estimates of commodity program spending through 2005 reflect outlays ranging from $13 billion to $19 billion below the levels estimated by the Congressional Budget Office when the farm bill was approved in 2002. Total commodity spending for 2002-07 is projected to be approximately $10 billion below the total level estimated in 2002.”
All commodity representatives told the committee that the farm program's commodity title should be Congress' top priority for not receiving cuts. But the committee was also asked to consider the rising importance of biofuel, including ethanol made from corn and grain sorghum and biodiesel made from soybeans, when writing an energy title for a new farm bill.
“The energy portion of the farm bill is very important to us,” said Terry Hilgedick, representing the Missouri Corn Growers Association. “Much of the ethanol production in our area is owned by farmers. We can produce ethanol cheaper than gasoline can be produced.”
The panel had differing opinions on what programs under the commodity title — the marketing loan, direct payment and counter-cyclical payment — were most valuable to their growers.
While the cotton and rice industries are saying the marketing loan is the most important component of the commodity title, John Thaemert, a wheat farmer from Sylvan Grove, Kans., and first vice president of the National Association of Wheat Growers, said the direct payment was most valuable for wheat growers, “who have received little or no benefit from the counter-cyclical program and loan deficiency payment program. Severe weather conditions for several consecutive years in many wheat states have led to significantly lower yields or total failure. The loan program and the LDP are useless if you have no crop.
“Secondly, the target price on the counter-cyclical program for wheat was set considerably lower than market conditions indicated, and severe weather conditions in some areas have created a short crop, which has led to higher prices in other areas. As a result, there has been very little support in the form of counter-cyclical payments.”
Thaemert says the organization is studying the impact of increasing the direct payment for wheat “and increasing the target prices to be more aligned with today's market conditions, while leaving the current structure of the loan program as is.”
When asked what message commodity leaders wanted the committee to take home from the hearing, Combs said, “I don't think our government should throw up its hands and say, ‘we're going to lose this or that.’ I think we have to fight for what we have in place.”
“It would be nice to win one,” Talent said in response. “But sometimes we feel like we're Hamilton Burger going up against Perry Mason.”