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California Association of Wheat Growers (CAWG)

October 15, 2005

NAWG PUSHES FOR EMERGENCY FARM ENERGY ASSISTANCE. Farmers are faced with skyrocketing prices for two of their critical high-volume inputs in the wake of Gulf Coast hurricanes and other energy market pressures.  Fertilizer costs have gone up by double digits, and for the first time since the Great Depression, a gallon of diesel fuel is more expensive than a bushel of wheat.

Farmers face this impact uniquely because, unlike any other participant in the food chain, they have no ability to pass along these costs in the form of surcharges.  In fact, farmers end up paying increased fuel costs to get goods delivered to their farms, and pay fuel surcharges to get their goods to market – in short, they pay everybody else’s fuel surcharges in addition to their own increased costs.  For this reason, farmers are uniquely in need of help.

A report produced by Washington State University tabulates fuel price increases at 67% from last year, and fertilizer price increases at 20-23% for wheat growers in eastern Washington.  Coupling the energy and wheat price changes from September 2004 to September 2005, the WSU study shows a farm earning a 2¢/bushel return in 2004 will lose 35¢/bushel in 2005 (see table).  On a 2500 acre farm with 60 bushel yields – both numbers are conservative for eastern Washington – that’s a loss of $150,000 in 2005.

 In response to this dire situation, NAWG is calling for Emergency Farm Energy Assistance.  At stake is whether an entire rural infrastructure providing food and fiber to consumers around the world will remain in business, and whether that infrastructure will be able to continue to provide the safest and cheapest food in the world to American consumers.

Adding up the costs of increased fuel use on the farm, higher fertilizer prices, fuel surcharges on inputs delivered to the farm, and fuel surcharges on goods shipped from the farm – all of which are paid by farmers – the scale of help necessary to avoid widespread foreclosures is equal to the level of the Decoupled Direct Payment received by producers.  The Direct Payment mechanism is well understood by producers and their creditors, and simple to administer.  NAWG urgently recommends and requests that a supplemental Emergency Farm Energy Assistance payment be provided as quickly as possible.

NAWG is encouraging its members to send letters to their Senators and U.S. Representative regarding the need for emergency fuel assistance. CAWG members can respond to this call by accessing NAWG's Legislative Action Center at http://capwiz.com/wheatworld/home/ . You may use the letter provided, or edit it to include your personal story. CAWG will also be communicating with our Congressional members.

WHEAT INDUSTRY RESPONDS TO U.S. OFFER TO CUT FARM PROGRAMS AT WTO. In what has been billed as a “now or never” time to kick the World Trade Organization (WTO) Doha negotiations into high gear, the United States offered a cut of 60 percent in U.S. trade distorting domestic supports, Amber Box programs, and a cut of 2.5 percent to the Blue Box cap -- shocking the industry with the size of the offer.

The U.S. wheat industry has been a strong supporter of the Administration’s ambitious agenda to expand world market access. However, the industry must also have access to safety net programs that keep the industry viable. The industry looks forward to a continuing discussion of policy alternatives

The proposal offered in Zurich goes beyond expectations.  For the wheat industry to stand behind such a proposal there must be true harmonization in the trade distorting practices used by other members, real, measurable parallel benefits must be achieved in market access and true disciplines to remove the monopolistic practices of export state trading enterprises along with measures that protect U.S. food donations to those in need.    

This offer to remove such a large portion of support programs comes at a universally difficult time for American farmers and ranchers.  It is difficult to envision giving up any programs when faced with yet unknown highs in fuel and other input costs and low market prices.

The industry depends on export markets for up to 50 percent of all sales and supports the WTO negotiations as the most effective way to remove trade barriers.  However, it will be impossible for the industry to unilaterally disarm.  In order to accept any package that causes changes in our domestic support structure U.S. wheat growers must see success in the other trade pillars.

IAN ANDERSON TO ATTEND 2005 WILOT PROGRAM. The 2005 class of the Wheat Industry Leaders of Tomorrow (WILOT) has been finalized.  CAWG Treasurer Ian Anderson of Birds Landing was selected to participate in this national leadership program together with nine other wheat growers from across the country.

WILOT is designed for wheat growers who are interested in becoming involved at the state level on committees and boards, but who have not yet been elected to statewide office or served on the NAWG Board of Directors. This program provides exposure to national activities and issues, leadership training, and an opportunity to visit with Monsanto company decision-makers about agricultural issues. Graduates of the WILOT program have put their skills to use in state and national policy issues, many of them becoming board members and/or officers in state wheat associations or in NAWG. 

The wheat industry has an ongoing need for informed and capable leaders, and WILOT is an important tool in meeting that need. CAWG congratulates Ian on his selection.

USDA RAISES PROJECTION FOR U.S. WHEAT EXPORTS; LOWERS GLOBAL PRODUCTION.

According to the latest World Agricultural Supply and Demand Estimates, projected U.S. 2005/06 ending stocks of wheat are down 94 million bushels from last month in part reflecting a 69 million bushel drop in production. HRS ending stocks are down 59 million bushels and, at 119 million bushels, are the smallest since 1995/96.

No changes are made to domestic use or imports. Exports rise 25 million bushels due to larger-than-expected sales to Nigeria and Iraq. Exports of HRW and HRS are higher but are partially offset by lower exports of white wheat. The projected 2005/06 price range is $3.20 to $3.60 per bushel, up 20 cents on each end from last month, compared with $3.40 for 2004/05. Global wheat production in 2005/06 is down over 2 million tons from last month, consumption and imports are up slightly, but ending stocks are down over 2 million tons. Foreign production is down fractionally due primarily to smaller crops in EU-25, Argentina, and Kazakhstan, partially offset by larger crops in Canada, Morocco, Australia, and Romania. Projected global imports are up fractionally due to larger imports by EU-25, Iraq, and Nigeria. Imports by China and Russia are down.

Forecast exports rise for Australia, Romania, and Serbia but decline for Argentina, EU-25, and Kazakhstan. Global consumption is up fractionally. The largest month-to-month consumption increases occur in Nigeria, Canada, Iraq, and Mexico. Global 2005/06 wheat ending stocks fall 2.2 million tons due mostly to lower U.S. stocks. Foreign stocks are up slightly with increases projected in Canada, Morocco, China, and Algeria. Stocks are down in EU-25 and Russia.