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California Association of Wheat Growers (CAWG)

November 15, 2006

ELECTIONS PASS REINS OF POWER ON THE HILL AND AG COMMITTEES. Tuesday’s midterm elections will put the House of Representatives and the Senate in Democratic hands beginning in January, which will mean a change in leadership and membership of both committees on agriculture.

Several members from the House Agriculture Committee were either defeated or did not run, which means the committee will include perhaps more than 10 new faces. On the Senate side, at least three new members will join the Agriculture Committee.

Rep. Collin Peterson, D-MN, and Sen. Tom Harkin, D-IA, the incoming chairmen of the House and Senate Agriculture committees, have indicated they support writing a five-year farm bill next year instead of extending the existing law. In recent interviews last week, both said Congress could write a five-year farm bill without interference from the Doha round of trade negotiations because the talks are not likely to be completed during that time period. Peterson said the 2007 farm bill will look similar to the current farm bill but with "some tinkering." That tinkering would add a permanent weather-related disaster program and a bigger energy title. He also said he wants to use the bill to make sure farmers -- rather than outside investors -- become the owners of ethanol and other biofuels plants.

House Minority Leader Pelosi, he said, has agreed that the energy title will be a focus of the Democratic Caucus as a way to update the urban-rural coalition necessary to pass a farm bill. Peterson said he believes that it might be possible to continue existing commodity programs and authorize new ones within the budget baseline. With commodity prices high, CBO might score the cost of the traditional commodity subsidies below the 2002 level. Peterson and Harkin each said the combination of a stronger energy title and conservation program is their highest priority. Peterson highlighted "conservation, wildlife habitat and renewable fuels [involving] switchgrass and other feedstocks."

In the meantime, the current Congress began a lameduck session to address outstanding issues including appropriations. NAWG hopes to get movement on its priorities: disaster assistance, the Water Resources Development Act and legislation to ensure permanent normal trade relations with Vietnam.

CROP ANALYSIS: WINTER WHEAT CROP OFF TO A MIXED START. (U.S. Wheat Associates)
Recent rains in the Great Plains have improved the new winter wheat crop in Kansas and Texas compared to this time last year, according to the National Agricultural Statistics Service (NASS) crop conditions report. Conditions are in troubling in Oklahoma, however, where 29 percent of the crop is very poor or poor, compared to just nine percent last year. The NASS rating system refers to growing conditions and yield potential. “Very poor” means there is a high potential for yield loss.

According to Oklahoma Wheat Commission Administrator Mark Hodges, the problem again is drought in the prime wheat region. While southern Oklahoma received beneficial rain the past week, the northern third of the state received little or none. According to Hodges, producers there “dust planted” the fields, hoping for better conditions. Oklahoma is the second largest HRW-producing state in the United States.

In Texas, the third largest HRW producer, conditions are much improved from this week last year: 91 percent of the crop is rated fair or better, up from 70 percent last year. In Kansas, the nation's largest wheat producing state, 96 percent of the crop is rated fair or better.

Winter wheat conditions around the rest of the country are generally good. The exception is Illinois and Ohio, the top two SRW-producing states, where rains have delayed planting and emergence. Across the U.S., 94 percent of the winter wheat crop has been planted, equal to the five-year average.

USDA REPORT SHOWS TIGHTENING DOMESTIC STOCKS. The Agriculture Department’s World Agricultural Supply and Demand Estimates (WASDE) report last week showed continued tightening in domestic wheat stocks toward the end of the 2006/07 marketing year, which ends May 31, 2007. The report pegged domestic wheat stocks at 418 million bushels, or 27 percent below last year. This is the lowest level of domestic wheat stocks since 1995-96. 

Global wheat production is up slightly (2 million bushels) from last month’s estimate, with increases in Romania and Ukraine but further declines in the Australian crop and a drop in Brazil’s production due to early growing season frost. But an increase in all use categories – particularly feed in Australia and the former Soviet Union – is expected to lead to tighter global stocks as well. The global carryover estimate at the end of the marketing year was dropped by almost 500,000 MT from last month to 118.83 MMT.

As would be expected, wheat prices are responding to the supply situation and to intensifying competition for acres in the United States. Last month, USDA’s Economic Research Service estimated the range for U.S. wheat prices (all wheat) between $4.10 and $4.60 for the 2006/07 marketing year; the accompanying chart includes the midpoint of that range as a point estimate.

 A separate report out of the U.S. Department of Commerce’s Bureau of the Census indicated that U.S. flour production in the third quarter (July to September) gained 1.2 percent in 2006 from 2005, and was the largest output for a quarter since 2001.

AGRICULTURE DISASTER ASSISTANCE PUSH MADE AGAIN. A group of farm state Senators tried again this week to bring an agriculture disaster package to the Senate floor. An amendment to the Military Construction spending bill providing disaster assistance for the 2005 and 2006 crop years was offered by Sen. Kent Conrad (D-N.D.) and 21 cosponsors on Tuesday.  A budget point of order was brought against the amendment, and Conrad withdrew the amendment after being promised by the Senate Leadership that the Agriculture Appropriations bill that currently contains approximately $4 billion in disaster and economic loss assistance would be brought to the floor the next day.  

Despite the agreement between Conrad and the Leadership, the agriculture bill was pulled from the schedule for Wednesday.  While there was indication that the bill would be brought up on Thursday night, it was ultimately delayed until Congress returns in December. The amendment offered by Conrad on Tuesday would provide traditional disaster assistance for the 2005 and 2006 crop years and would remove a provision to provide an economic loss payment that is opposed by the Administration and several Republicans.

Conrad is expected to offer the same amendment to the agriculture bill when Congress finally takes up that measure next month, although some believe that the disaster provisions will again be delayed until the new Congress reconvenes after the New Year due to strong objections from the White House and several Republicans in both the House and Senate.

The provision currently in the agriculture bill would provide a payment rate of 50 percent of the established price of the crop if a farmer has a loss of at least 35 percent. Unlike in other disaster programs, the 95 percent crop value cap and deduction for crop insurance indemnities were removed from this proposal. The disaster provision would also provide a payment of 30 percent of the direct payment for those enrolled in the farm program for the 2005 crop year, as well as USDA grants to states to provide agricultural market and economic assistance, including direct payments. 

As most in rural America know, this assistance is desperately needed. USDA declared 80 percent of counties disaster areas for the 2005 crop year and fuel prices have doubled in just a few years.

NAWG’s top priority this year has been, and continues to be, securing an agriculture disaster package that provides help to wheat producers who have suffered from droughts, floods, fires and freezes over the last two years.  NAWG and several other agriculture organizations will continue working with our lawmakers towards securing this necessary legislation when Congress reconvenes next month.