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California Association of Wheat Growers (CAWG)

December 15, 2005

TRADE OFFICIALS REACH AGREEMENT ON AGRICULTURAL SUBSIDIES. Trade ministers meeting in Hong Kong under the auspices of the World Trade Organization agreed to end agricultural export subsidies by 2013 – a goal that U.S. negotiators have long supported.  This agreement should address one major obstacle to overall progress within the current round of negotiations, called the Doha Development Round. The deal would also require rich nations to eliminate by 2008 tariffs and quotas on 97 percent of goods coming from the poorest 50 countries; eliminate cotton export quotas by next year (primarily aimed at the United States); and increase development aid to poor countries.

 NAWG TESTIFIES ON LOAN PROGRAM. President of NAWG, Sherman Reese, testified before the House Committee on Agriculture's Subcommittee on General Farm Commodities and Risk Management.  The hearing, chaired by Congressman Jerry Moran (R, KS), was held to discuss technical issues with county posted prices.  

 Reese testified that "methods used by USDA to calculate posted county prices have an arbitrary and unpredictable effect on Loan Deficiency Payment rates.  Posted county prices are calculated by subtracting the county differential from the appropriate U.S. terminal market price. County differential reflects the cost of moving the commodity from that county to the terminal market, plus additional factors such as local demand and local markets.  These additional factors appear to be subjective values with no established formula, giving rise to discrepancies between the posted county price and the actual cash price....these discrepancies are unacceptable, not only because of the inconsistency, but for the possible failure of a safety net for farmers who rely on the Loan Deficiency Payments when markets fail to provide a price that covers the cost of production."

 Reese also testified about a concern of producers in the Pacific Northwest regarding substantial differences in county loan rates for different classes of wheat. Reese asked the Subcommittee to investigate these discrepancies in loan rates to determine if they are following market signals, or whether there is interference in those signals so that appropriate remedies can be found if they are necessary.

 HOUSE SUBCOMMITTEE PASSES AMMONIUM NITRATE BILL. The House Homeland Security Subcommittee on the Prevention of Nuclear and Biological Attack passed unanimously a bill this week that would provide recordkeeping requirements for the sale and handling of ammonium nitrate fertilizer. The bill, H.R. 3197, now heads to the full House Homeland Security Committee for consideration.

 The bill provides authority to the Secretary of Homeland Security to require that anyone selling, handling, or purchasing ammonium nitrate be registered with the Department of Homeland Security (DHS). Inspections of facilities handling ammonium nitrate would be permitted by DHS. The purpose of the bill is to better monitor the manufacture and distribution of the fertilizer, which was used in terrorist explosions in Oklahoma City in 1995 and Bali, Indonesia, in 2002. No other fertilizers are presently included in the bill, though there is a possibility that more could be added in the future.

 The bill does not specify how farmers would be required to register under the Act, though it is clear that they would be required to do so. NAWG will be monitoring this bill, looking at ways to keep the compliance burden manageable. It may be desirable to have a state pesticide applicators license also serve as registration for use of ammonium nitrate fertilizer. State laws that regulate ammonium nitrate handling would be allowed to stand unless they conflict with the federal law, in which case they would be pre-empted.

 NAWG, INTERCORP LAUNCH NEW POLLUTION LIABILITY PRODUCT. NAWG has formed a partnership with Intercorp, Inc., a veteran insurance program management firm, to provide an environmental insurance program for growers. The program recognizes the increasing need for growers and farmers to be sensitive to environmental concerns, and offers an affordable way to help them manage environmental risk.

 Coverages provided will include on-site and off-site cleanup coverage for pollution conditions, third-party liability for bodily injury and property damage for pollution conditions both on and off-site, legal defense costs, and above ground storage tanks.  Many of these pollution-related exposures are excluded from farm general liability policies.  NAWG suggests that you consult with your insurance agent to determine specific exclusions in your policies and how this new product might help cover any gaps.

 Additional coverages outside of the basic program can include underground storage tanks, pollution conditions resulting from the transportation of wastes or products, and pollution conditions resulting from non-owned disposal sites. One of the risk management tools that enhances the value of the program is a self-administered environmental assessment, designed to pinpoint how the farmer is managing environmental exposures and recommend improved practices or procedures.

 Intercorp, Inc., is an insurance program management firm headquartered in Ephrata, Pennsylvania, which specializes in developing specialized insurance programs for affinity groups and associations. A primary division of Intercorp concentrates on environmental insurance programs. NAWG members should contact their local insurance agent for placement of the coverage through Intercorp.  Further information is available from Stephen P. Arnold, Intercorp, Inc., 1438-F West Main Street, Ephrata, PA 17522-1345; telephone 800-640-7601 or 717-721-3500; fax 717-721-3515; info@intercorpinc.net <mailto:info@intercorpinc.net>; <http://www.intercorpinc.net/programs/agenvironmental.asp>.

 NAFTA PANEL UPHOLDS ITC DECISION ON WHEAT. On December 13th a North American Free Trade Agreement bi-national panel upheld the U.S. International Trade Commission’s decision to lift antidumping and countervailing duties on Canadian hard red spring wheat. The decision comes despite continued dumping and subsidizing practices by the Canadian Wheat Board (CWB).

Of the recent decision North Dakota Wheat Commission Administrator Neal Fisher said that the “questionnaires issued in the remand investigation reveal an even greater frequency of underselling than in the original injury investigation, both authorities are now choosing to overlook those infractions.” Despite the decision reversal, Fisher called the legal battle with the Canadian Wheat Board a major step in getting U.S. governmental agencies to recognize how the CWB “undermines the integrity of the U.S. trading system.” This week at the Hong Kong Ministerial the U.S. trade negotiating team has demanded that the monopolistic practices of state trading enterprises be dealt with in the competition pillar of the World Trade Organization negotiations.

Cuba Buys U.S. Wheat. On Wednesday, Cuba’s food buying agency in coordination with U.S. Wheat Associates announced Cuba’s purchase of half a million tons of U.S. wheat for the 2006 calendar year. Cuba has rapidly become the largest U.S. wheat consumer in the Caribbean. Of the order former USW chairman Keith Kisling, an Oklahoma wheat farmer, said Cuba’s “commitment is a very important -- and greatly appreciated -- boost to U.S. wheat exports."