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California Association of Wheat Growers (CAWG)

September 15, 2006

NAWG MEMBERS LOBBY FOR DISASTER ASSISTANCE. This week, NAWG members, officers and staff joined several other farm group members on Capitol Hill to lobby for much needed disaster assistance. They participated in two press conferences – one on the House side and one on the Senate side - with several Members of Congress, and also visited their Congressional offices to push for passage of a disaster assistance package that is included in a bill recently passed by the Senate Agriculture Appropriations Committee.

The disaster package includes nearly $4 billion in funding for agriculture disasters that resulted from fires, floods, freezes and severe drought. The bill is currently awaiting action on the Senate floor.  Once the Senate finishes the measure, it will then have to be reconciled with a House version that does not include any agriculture assistance. More NAWG members will be coming to D.C. next week to continue the push for disaster assistance.

WASDE REPORT SHOWS TIGHTER STOCKS. USDA’s World Agricultural Supply and Demand Estimates (WASDE) report this week showed only slight changes from last month on the domestic side, led by a 5 million bushel increase in food use demand. This change tightens ending stocks to 429 million bushels, down 5 mbu from last month. The midpoint of projected price remains at $3.20, but the range was narrowed to $2.95-3.45. 

Globally, the trend was mirrored – higher trade and consumption statistics leading to tighter ending stocks.  Global production also dropped 1.9 MMT from the August estimate to a total of 596.1 MMT.  The biggest factor in this change was smaller projected production from Australia.  India is now expected to import 6 MMT of wheat this year, up sharply from the 4.5 MMT estimate one month ago.  Export growth is expected from Canada and Ukraine, while U.S. exports remain steady at 24.49 MMT.  Global stocks are expected to tighten to 126.4 MMT, down 2 MMT from the August estimate.

NOAA ISSUES EL NIÑO ADVISORY. The National Oceanographic and Atmospheric Administration (NOAA) reported Wednesday that El Niño conditions have developed in the tropical Pacific and are likely to continue into early 2007. The advisory was based on warming temperatures in the equatorial Pacific over the last two weeks. "Currently, weak El Niño conditions exist, but there is a potential for this event to strengthen into a moderate event by winter," said Vernon Kousky, NOAA's lead El Niño forecaster.

NOAA’s announcement stated that some impacts from the developing El Niño are already evident in the pattern of tropical precipitation. During the last 30 days, drier-than-average conditions have been observed across all of Indonesia, Malaysia and most of the Philippines, which are usually the first areas to experience ENSO-related impacts. This dryness can be expected to continue, on average, for the remainder of 2006.

Also, the development of weak El Niño conditions helps explain why this Atlantic hurricane season has been less active than was previously expected. El Niño typically acts to suppress hurricane activity by increasing the vertical wind shear over the Caribbean Sea region. However, at this time the El Niño impacts on Atlantic hurricanes are small. Typical El Niño effects are likely to develop over North America during the upcoming winter season. Those include warmer-than-average temperatures over western and central Canada, and over the western and northern United States. Wetter-than-average conditions are likely over portions of the U.S. Gulf Coast and Florida, while drier-than-average conditions can be expected in the Ohio Valley and the Pacific Northwest.

USDA FORECASTS SHOW FARM INCOME FALLING AGAIN. The Department of Agriculture’s Economic Research Service predicted this week that farm income will fall again this year. Net farm income is forecast to be $54.4 billion in 2006, down from $73.8 billion in 2005. According to the study, “the projected decline in farm income from the record levels of previous years results from several components on both the income and expense sides of the ledger.”

“Purchases of manufactured inputs are forecast to rise by $2.8 billion from 2005 due to higher fuel and fertilizer prices with the latter resulting from high prices for natural gas.”

The report also notes that the value of total production in the U.S. farm sector is expected to decrease by $10.5 billion from a 2004 level of $283 billion. For more information and to read the complete report, please visit: http://www.ers.usda.gov/Features/farmincome/2006/august/ .

ELIMINATING CRP WILL LOWER CROP PRICES, REPORT SAYS. A paper from the Agricultural Policy Analysis Center at the University of Tennessee shows significant impacts on crop prices and planting practices if the Conservation Reserve Program were to be eliminated or expanded and farm programs retain their current structure.

The report, “Analysis of the Economic Impact on the Agricultural Sector of the Elimination of the Conservation Reserve Program,” examines the impact of non-renewal and non-extension of CRP contracts as they expire. It predicts that if CRP contracts are eliminated as they expire, 12.6 million of today’s 34.7 million enrolled acres will return to production, 9 million of them to corn, soybeans or wheat. By 2015, this would reduce wheat prices to $2.92, 61 cents below the USDA projected baseline. For corn, soy and wheat growers, net market returns are estimated to drop $6.9 billion, while federal farm program payments would rise $32.6 billion over the 2007-2015 study period.

The paper also examined what might happen if CRP were expanded. Increasing acres to 39.2 million, the current statutory limit, would raise net farm income $600 million and reduce costs to the government by $6.3 billion, the authors estimated. Increasing CRP acres to 45 million would raise net farm income to $1.7 billion and reduce costs to the government by $12.7 billion, they estimated.

NAWG supports a CRP cap of 39.2 million acres. NAWG also supports writing a 2007 Farm Bill that builds on the strengths of the 2002 Farm Bill but provides more equitably for wheat growers. To view the full report, please visit: http://apacweb.ag.utk.edu/crp.html

NAWG, OTHER GROUPS ASK CONGRESS TO KILL FEE INCREASE. NAWG and four other agricultural organizations wrote to members of the House and Senate Agriculture Appropriations Subcommittees this week highlighting an intended fee increase that will adversely affect partnerships in agricultural research.  USDA’s Agricultural Research Service (ARS) is considering a proposal to charge a 10 percent overhead fee on most external funds provided to ARS scientists by nonprofit agencies. This proposal will assess overhead fees on grants provided to ARS scientists by state and national checkoff organizations, as well as a number of private nonprofits.

The letter requested that the members of the Appropriations committees – who provide funding for ARS activities - take appropriate action to prevent this policy from being implemented. “If implemented, this fee will result in the rescission of many of those projects and undermine collaboration between ARS and the private sector that has taken decades to develop,” the groups wrote. 

An April 13, 2006, bulletin from USDA to ARS personnel states the policy of ARS as recovering total costs, both direct and indirect program support costs (IPSC), from external grants provided to agency scientists.  ARS administration already deducts 10 percent from federal appropriations to cover its administrative costs.

Due to a lack of communication with outside funding sources and objections from those who did hear about the fee, implementation for Fiscal Year 2006 has been deferred by ARS.  Any fees that were collected thus far in FY2006 are being refunded, but the ARS Administrator’s office confirmed verbally on Aug. 4 and again in writing this week that the intent of the agency is to implement the fee sometime in FY2007, which starts Oct. 1.

In addition to NAWG, the letter was signed by the American Malting Barley Association, the National Barley Improvement Committee, the National Corn Growers Association and the National Cotton Council.