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California Association of Wheat Growers (CAWG)

November 30, 2005

CONGRESSIONAL UPDATE. NAWG reports that when Congress returns from the Thanksgiving recess much important work remains to be done. The House returns the week of December 5th and the Senate the week of December 12th and one of the more difficult tasks will be to work out the differences in the spending reduction budget reconciliation bills that passed each chamber. The House proposes to reduce $49.9 billion in spending over 5 years while the Senate plan would require $35 billion in reductions over 5 years. For agriculture programs, the House proposes $3.7 in reductions with a 1% reduction in program payments and deeper reductions in food and nutrition programs, The Senate proposes a $3 billion reduction with a 2.5% reduction in program payments and little or no adjustments in food and nutrition programs. Another important distinction is that the Senate proposal extends the budget baseline out through 2011 while the House plan relies on a commitment from House Budget Committee leaders and a Congressional Budget Office score that assumes the baseline is extended through 2011. This is important to ensure an adequate budget baseline is available to fund the next Farm Bill when it is rewritten in 2007.

 Other policy differences contained in each version will also make it difficult to reach a compromise on the two versions while still retaining the votes needed to pass the conference agreement in each chamber. One of the more contentious is the proposal to allow oil and gas drilling in the Arctic National Wildlife Refuge (ANWR) which is included in the Senate bill but not the the House version. A significant block of anti-drilling Republicans have stated they will not support a conference agreement allowing ANWR drilling in the House. And a number of key Republican Senator's have said they will not support a conference agreement in the Senate if the ANWR drilling authorization is removed. The other important unfinished business is a supplemental appropriations bill for further Hurricane Katrina recovery efforts which may also include more comprehensive crop disaster assistance and economic loss assistance for farmers being squeezed by rapidly escalating input and transportation surcharge costs. The latter provisions have been a focused priority for NAWG and a considerable amount of time and effort has been spent communicating the severity of the situation to Members and staff as well as the need for relief. It is thought by some that the must-pass 2006 Department of Defense Appropriations bill may be the legislation that will carry the agriculture disaster and economic loss provisions forward.

All CAWG members are encouraged to contact their members of Congress in support of economic loss assistance. You may contact your Representative and Senators through NAWG's Legislative Action Center at <http://capwiz.com/wheatworld/home/>  A letter has been provided, and if you would like, you may edit it to include your personal information. If you have any questions about contacting your elected officials, please call the CAWG office.

JOHANNS NAMES NEW RMA LEADERSHIP. Secretary of Agriculture Mike Johanns has chosen Eldon Gould as administrator of USDA's Risk Management Agency. Gould replaces Interim Administrator James Callan who took over in October after Ross Davidson Jr. resigned to become a senior energy advisor to the Secretary. Gould’s duties will also include serving as the manager of the Federal Crop Insurance Corporation Board. Gould is a farmer from Kane County, Illinois. He has  served on numerous boards including the Illinois Farm Bureau, the Illinois Corn Marketing Board, the U.S. Grains Council Board, the U.S. Meat Export Federation Board, and the Advisory Board for the University of Illinois Departments of Agricultural Entomology and Crop Science.

 U.S. AG TRADE REPORT ISSUED. The U.S. Department of Agriculture issued its Outlook for U.S. Agriculture Trade last week. For fiscal year 2006 USDA forecasts the U.S. to export a record $64.5 billion in agricultural products, a $2.1 billion increase from 2005. The USDA forecast a $3 billion trade balance for 2006, similar to the trade surplus in 2005.

Wheat and rice are forecast to have stronger than expected unit values. Hard wheat prices have increased due to strong demand and tighter supply from competitors. The forecast also estimates an increase in volume of 800,000 tons of wheat in 2006.

The market for cattle and pork, cotton, tree nuts, wheat, and rice all pushed the increased forecast for U.S. exports in 2006. Horticultural products saw two thirds of the gain in export value with fruits and vegetables, wine, and beer driving most of that increase. Soybeans and other oilseeds saw their forecast cut due primarily to increased competition from aboard, mainly from Brazil.

 EU SLASHES SUGAR SUBSIDIES. WETEC reports that in a bid to bolster the European Union’s negotiating stance at the World Trade Organization, the EU has announced cuts to sugar subsidies for the first time in four decades. After three days of negotiations among EU member states, the ministers agreed to a 36 percent cut over four years to the EU’s guaranteed sugar prices. This proposal came after a 39 percent cut over two-year proposal failed to garner enough support within the European Commission. Three member states opposed the 36 percent cut: Poland, Latvia, and Greece. The slash in subsidies is designed to reduce EU production and therefore decrease the degree to which the EU dumps sugar on world markets. This is seen by U.S. officials as a political move to garner support for the EU’s Hong Kong proposal from some developing countries. As well, this move might force the issue of cotton on the U.S. from developing countries. Developing countries can point to EU sugar concessions as they attempt to negotiate greater cotton concessions from the U.S.

WTO RULES IN U.S. FAVOR ON RICE. A World Trade Organization Appellate Body panel announced yesterday it has found in favor of the U.S. in a case involving Mexican antidumping duties on rice imports. The panel upheld an earlier WTO ruling which found Mexican antidumping duties in violation of WTO rules. The panel agreed that Mexico improperly based its injury analysis on outdated information and failed to examine half the data collected. Also the panel agreed that the antidumping duty was levied against two producers that never actually dumped U.S. rice into Mexico.

BRAZIL, U.S. AGREE TO SUSPEND COTTON RULING IMPLEMENTATION. U.S. and Brazilian negotiators have agreed to put off the arbitration proceeding for authorizing the level and type of retaliation Brazil has requested to impose on the U.S. for its failure to remove cotton subsidies. A WTO dispute resolution panel found U.S. cotton support, such as the Step-2 program, to directly hurt the Brazilian cotton industry. Although the U.S. has agreed to eliminate the Step-2 program it failed to reach the deadline imposed by the WTO ruling for the program’s removal, allowing Brazil to impose retaliatory tariffs. If a deal cannot be made between the U.S. and Brazil, and Brazil imposes the retaliatory tariffs they will probably be substantial since the WTO found U.S. cotton support to hurt the Brazil cotton industry on the order of $3 billion. The repeal of the ‘step-2’ program is in the current omnibus budget reconciliation bill stalled in Congress.