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California Association of Wheat Growers (CAWG)

April 30, 2006

FIRST MAJOR SHIPMENT OF WHEAT TO MEXICO SINCE LIFTING OF THE TRADE BAN SET FOR MAY 5. As reported in earlier Updates, ten years of effort finally resulted in opening the Mexican market to California wheat. The first major sale has taken place and the initial shipment of grain will leave Woodland, CA by rail on May 5^th. The California Wheat Commission and CAWG are organizing a celebration to mark this important event. For more information, contact Bonnie Fernandez, CWC Executive Director, at 530 661-1292.

DISASTER AND ECONOMIC LOSS PROPOSAL UNDER FIRE. Language that would provide almost $4 billion in emergency disaster and economic loss assistance to America’s farmers came under attack this week. The assistance package became the target of a veto threat from the Bush Administration -backed by 35 Senators vowing to uphold it - as well as a number of potential elimination amendments by Senators.

But, though some Senators want to strike agriculture and other add-ons from the bill, a  motion by Sen. Craig Thomas (R-WY) to return the supplemental package to that proposed by the President – about $14 billion less than a Senate Committee approved – was tabled by a vote of 72 to 26 Wednesday. Debate on the supplemental Thursday was held up by a filibuster by Sen. Ron Wyden (D-OR). Debate was limited Thursday evening and Friday because of previously planned events, though the measure will be taken up again next week.

The agriculture package would provide a payment rate of 50 percent of the established price of the crop if a farmer has had a loss of at least 35 percent. Unlike in other disaster programs, the 95 percent crop value cap and deduction for crop insurance indemnities don’t apply to this proposal. The package would also provide a payment of 30 percent of the direct payment for those enrolled in the 2005 crop program as an energy assistance measure.

CAWG has been active on the issue by encouraging California Congressional members to support the package. We join NAWG in asking our wheat growers to speak out on the issue by calling their Representative’s office, or through the NAWG website at: http://capwiz.com/wheatworld/home/

FAPRI SAYS 2006 WHEAT FUEL, FERTILIZER UP 25 PERCENT. The need for this assistance was underscored in a report issued April 19 by the Food and Agricultural Policy Research Institute that estimated increased fuel and fertilizer costs of 24 to 27 percent from 2005 for wheat producers. Fuel and fertilizer account for about 52 percent of variable costs associated with producing wheat, the report said. The full report is available at:

http://www.fapri.missouri.edu/outreach/publications/2006/FAPRI_UMC_Report_04_06.pdf

HEARING UPDATE: RAIL, CROP INSURANCE AND BIOFUELS. Three hearings were held this week on issues of importance to American agriculture. The key details of these hearings are below.

Rail Capacity: The House Committee on Transportation and Infrastructure’s Subcommittee on Railroads held a hearing this week on the issue of rail capacity. Capacity is becoming a major problem for many rail users and will continue to worsen if usage predictions pan out. 

Representatives of the freight and passenger rail systems as well as shippers testified at the hearing. The railroad representatives generally praised the Staggers Act. They also stated support for “public private partnerships,” notably tax credits for capital investments, to ease capacity struggles.

Shippers from the cement, electric and grain industries, on the other hand, expressed their concerns about both capacity and captive issues, often championing H.R. 2074, which NAWG has strongly supported. They also urged Congress to consider setting conditions that would have to be achieved to gain federal tax credits for capital improvements.

A briefing was held Monday for Congressional staffers on the issue of rail captivity. Representatives from the chemical, energy and other industries talked to the staffers about how their member companies were affected by rail capacity and captivity. NAWG represented the wheat industry at this briefing.

Crop Insurance: The House Agriculture Committee’s Subcommittee on General Farm Commodities and Risk Management examined crop insurance in the second in a series of two hearings. The governor of North Dakota, a variety of producer representatives and a panel of agricultural economists testified.

Though witnesses testified based on their particular crop or situation, the come-away message was that the crop insurance program faces some serious questions including how to fairly calculate APHs, how to proceed with reduced premium plans and other issues. In the context of pending disaster legislation, North Dakota Governor John Hoeven testified that farm bills, crop insurance and disaster payments are issues that go together. The biggest problem, he said, is that that producers can’t insure to a high enough level on a cost effective basis.

Biofuels: The Senate Committee on Agriculture, Nutrition and Forestry held a hearing on the state of the biofuels industry. The most interesting testimony to the wheat industry came from Bob Dinneen, president and CEO of the Renewable Fuels Association, who said ethanol is the “single most important value-added market for farmers.”

Part of Dinneen’s testimony focused on emerging kinds of ethanol, including cellulosic ethanol, as potential sources of expanded ethanol supply. Dinneen specifically mentioned Iogen Inc., a Canadian company that NAWG has been working with closely. That company plans to build a commercial cellulosic ethanol facility in the U.S. in 2007 processing about 1,500 tons of wheat straw per day. Committee Chairman Sen. Saxby Chambliss (R-GA) stated his support for an expanded energy title in the next Farm Bill.

GRASSLEY ON EXTENDING TPA, DOHA ROUND DEADLINES. (News from WETEC) Senate Finance Committee Chairman Chuck Grassley (R-Iowa) suggested this week that Congress might consider a joint one-year extension of Trade Promotion Authority and the Farm Bill – but only if the ongoing World Trade Organization Doha Round talks are on track.

It now looks obvious that the April 30 deadline for reaching agreement on how to proceed on agricultural and non-agricultural market access – the crucial “road map” meant to show the way for concluding the talks by the end of this year – will not be reached. “This is disappointing,” he said. “The failure to meet this deadline will make it more difficult to get the Doha Round done in 2006.” And without agreement on Doha, Sen. Grassley doubts that TPA would be extended past its current July 2007 expiration.

Some lawmakers are raising the idea of combining a one-year extension of TPA with a similar extension of current farm programs. “I think that would be a very good thing to do,” he said. While a longer-term extension of U.S. farm programs would create more stability for U.S. farmers, Sen. Grassley said it would be acceptable if combined with a TPA extension. But the short-term extensions would be contingent on progress in the Doha Round.  

The Senator warned developing countries that a failure to reach a Doha agreement “would further dampen enthusiasm in Congress for extending U.S. preference programs.”