The ability of bioenergy to dominate headlines shows no signs of slackening. “Frankly, right now, I’m more of an energy policy analyst than a farm policy analyst,” said James Wiesemeyer, vice president of Informa Economics, at the 2007 Arkansas State University Agribusiness Conference in Jonesboro.
Wiesemeyer has written on agriculture-related issues for 30 years and has never covered “a more important subject than renewable fuels. I think we’re going into a sustainable, golden era of U.S. agriculture that will definitely impact (the South) within five to 10 years, big-time.”
Currently, soybean prices have rallied because of the concern that $4-plus corn prices will “whittle down” soybean acres too much.
“There’s a battle for acres. This is happening even though the carryover for soybeans is at 595 million bushels, a record.”
On March 30 the USDA prospective planting report comes out. It will be one of the “most important and market-sensitive reports in decades. Fasten your seatbelts because you’ll see market volatility in corn after that report.”
And there’s more good news on the horizon, predicted Wiesemeyer. During the second half of 2007 the U.S. economy “will be even better than it is now. Worldwide, a number of countries are growing faster than the United States. That means their ability to import your farm products is increasing. So the foundation of the U.S. and foreign economies is good.”
Recently, the U.S. dollar has been in a correction downturn. For U.S. agriculture “that’s good because it makes your product more competitive. If I’ve learned anything … it’s that you have to be efficient to survive and your industry has to be competitive.
“This helps you be competitive. But you don’t want the dollar to go down too far. This has caused all the investment in our great economy by … China. China is the one big, major player since the go-go days of the 1970s market.”
China is just beginning its love affair with the automobile.
“They’re where we were in the 1950s and 1960s. They won’t hold back. So the demand bull market in energy will continue (due to) China and India.”
And China isn’t looking back.
“In about 15 years, China’s GDP will exceed the United States’ GDP.… Outside the U.S., the world looks upon China as an option. They need another power in the world to balance the power of our great country.
“So they’ll use China against us. They’ll play the so-called ‘China card.’”
Before saying anything about the new farm bill, “you really have to know how much money Congress has to spend. In the 2002 farm bill, they spent a lot — $48 billion more over five years than what the CBO said they could afford.”
When Congress’ budget resolution is produced in early March, it will be a key indicator on how much money will be available for the new farm bill.
“The budget resolution is important because that’s when farm state lawmakers will ask for $10 billion or $12 billion more than the farm programs baseline, which will probably be $18 billion lower than the 2002 farm bill baseline.”
This is due to higher prices for corn, soybeans, wheat and rice.
“That means lower loan deficiency payments, lower, if any, counter-cyclical loan payments. So we’ll spend a lot less.
“However, we’re in a deficit situation with a deficit of about $250 billion. But they’re still utilizing Social Security funds to mask what the deficit really is.”
Wiesemeyer is telling commodity groups that the time has arrived to change farm policy.
“Change is coming, whether it’s this bill or another. Don’t be afraid of change. I say that because in the years 2015 to 2020, the Baby Boomer generation — and I’m part of the 79 million — will be retired. We can’t afford our Social Security, especially Medicare, costs right now. It’s an accident waiting to happen.
“So leadership will have to deal with that situation. I don’t think (anyone should expect) substantial funding for farm policy in those years. Now is the right time for change.”
More writing is on the wall. In the House, Democrats have already approved a “pay as you go” approach.
“If you have an increase in an entitlement program, you must find a budget off-set elsewhere. Or you can raise taxes. It’s very controversial but watch that because it will come into play during this farm bill debate.”
Deficit versus surplus
The 1996 farm bill was written in an era of budget deficits.
“That was really the beginning of the Freedom to Farm bill. At that time, the farm-state lawmakers wanted to protect just what they were spending. That’s very similar to the debate that will unfold in the months ahead.
“In 2002, we were in a surplus situation, real or perceived. It was really perceived but that didn’t stop farm-state lawmakers from getting a lot more money. And it created pretty good farm policy and one of the best safety nets I’ve seen.”
The Marketing Loan Program is “fundamentally the best program in the U.S.” that Wiesemeyer has seen.
“But it can’t continue in years ahead … because we’ve been found out. It will be ruled trade-distorting if it’s challenged. A developing country will challenge it eventually and they’ll win. So, again, make reforms now before you are forced to reform.”
And throw this into the mix: on Feb. 13, rice-growers voted “to increase the loan rate from $6.50 to $6.70 and increase the target price from $10.50 to $11.”
Meanwhile, soybean growers proposed their program on Feb 9. They also want a little higher loan rate and target price.
As for trade talks, Wiesemeyer was much more optimistic about the Doha Round than others on the winter meeting schedule.
“Bush needs a legacy badly and that’s an understatement. He wants to get this trade agreement through. Eventually, the Doha Round will be completed.
“I’ll bet anyone who says it will implode. I don’t think it will because it’s too important.”
Ninety-four percent of all world trade is outside agriculture, pointed out Wiesemeyer.
“That’s why the Uruguay Round — the one before Doha — took eight years to complete. They wanted to get it done in three years but it took an additional five.
“Now, (we) may be under a new president before the (Doha Round) gets done. The reason I say that is because of all the industries outside agriculture. Think of Bill Gates, the bankers, the telecommunicators. Once they’re done picking the low fruit after globalization unfolds, they’ll want more market access. They’ll go to Congress and the administration and say, ‘get this agriculture agreement done.’ That will happen.”
But when it happens, “it will bring substantial reform to U.S. farm policy. I hope any lawmaker that tells you trade policy won’t dictate U.S. farm policy is Catholic so they can go to confession because they’re lying.”
First saying he hopes he’s wrong, Wiesemeyer doesn’t believe Cuba will be open to U.S. trade soon.
“As long as you have the current president — and I can tell you a lot of positives about Bush — you won’t have open trade with Cuba. The reason is the Cuban-American voter in Florida.
“Assuming Castro ever dies, his brother, Raul, will take over. But they have a benefactor, the new Russia, called Venezuela. And (Venezuela is) Cuba with oil. And Venezuela is very anti-U.S. and anti-Bush.
“When you see legislation calling for an open market with Cuba, flip the page. It won’t happen shortly.”
For rice producers angry about the current LibertyLink situation, Wiesemeyer quoted Ronald Reagan: “revenge is an emotion, not a policy.”
“Don’t turn your anger towards the agriculture research facilities. That’s a short-term, knee-jerk reaction. Until you know how (the contamination) happened — and we still don’t know — how can you find a solution? Find out and admit how it happened.
“For perspective, it took the corn industry (over) four years to get Starlink out of the system. But this too shall pass and don’t give up on GMOs.”
Wiesemeyer also broached immigration. Every 35 seconds an immigrant comes into the United States either legally or illegally. And every 7 seconds, a child is born in this country.
“Add those two groups together and almost 50 percent are Hispanic. You think this country isn’t changing? It’s unbelievable. This will have trade, policy, economic and political repercussions.
“You think the presidential (candidates) next year won’t vie for the Hispanic vote? Watch it. It’s a growing phenomenon.”
As for how the world views the United States, “we aren’t well-liked. I think they’re wrong but you don’t have to travel a lot (to see this). When I come back from the Middle East, I kiss the tarmac when I get back.”
Even though bioenergy won’t bring the United States “even close” to energy independence, the effort is still worth it because of lessening dependence “on countries that aren’t our friends. Think through 911 — all but two (of the hijackers) came from Saudi Arabia. They say one thing and do another. The terrorists only have to be successful one time in bombing the world’s biggest crude oil plant in Saudi Arabia. And they’ve already tried more times than our government has admitted.”