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California Association of Wheat Growers (CAWG)

October 1, 2007

FARM BILL EXPIRES SEPTEMBER 30^th; SENATORS SEND LETTER ON DIRECT PAYMENT.  The 2002 Farm Bill’s life is now measured in hours, but it appears likely that there will be more delays in the Senate Agriculture, Nutrition and Forestry Committee, which has yet to schedule a mark-up for new farm policy.

Committee Chairman Tom Harkin (D-Iowa) indicated last week that his Committee might again miss a deadline he has set for it and delay action on the 2007 Farm Bill until after the Columbus Day Recess due to ongoing funding and priority issues. Senate Finance Committee Chairman Max Baucus (D-Mont.) has indicated he will hold a mark-up on his farm bill-related tax package as early as next week.

The House and Senate have passed a continuing resolution that will fund the government and extend all mandatory programs through mid-November. NAWG staff is working to determine the implications of this, specifically if the Department of Agriculture will have authority to issue advanced direct payments under 2002 Farm Bill rules.

Early this week, five Senators wrote Harkin and Senate Agriculture Ranking Member Saxby Chambliss (R-Ga.) on the need to maintain the direct payment. Signatories included Sens. Pat Roberts (R-Kan.), Chuck Grassley (R-Iowa), John Thune (R-S.D.), Mike Crapo (R-Idaho) and Thad Cochran (R-Miss.)

The letter read, in part:

“During the five years since the 2002 Farm Bill was enacted, many producers have suffered complete crop losses, often in multiple years, due to a host of weather calamities...Producers without crops to harvest will likely receive no benefits from the loan or counter-cyclical programs due to high prices. However, they will receive benefits from direct payments. Under these circumstances, why would we want to cut direct payments?

“Although we have seen no draft proposals from the Committee, we are concerned with news reports indicating that direct payments could be cut or placed on a triggered, sliding scale in order to pay for other programs in the bill. Cuts to direct payments, while raising target prices and loan rates, makes absolutely no sense for those producers without crops to harvest. If target prices and loan rates are increased in proposals brought before the Committee, we believe that direct payments should undergo a similar increase.”

The Senators also expressed concerns with proposals that would make the direct payment less World Trade Organization-compliant and potential cuts in crop insurance.

LETTER URGES SENATE TO AVOID REORGANIZATION PROPOSALS.  NAWG is leading led a coalition of groups writing the Members of the Senate Agriculture, Nutrition and Forestry Committee this week, urging them to reject any proposal to create a new bureaucratic structure over the Agricultural Research Service (ARS) and the Cooperative State Research, Education and Extension Service (CSREES).

“The current coordination within and between the research agencies is the result of diligent efforts by the researchers and the national program leaders...The root of the challenge in agricultural research is a need for more funding, not a need for more bureaucracy,” the letter said.

The group voiced support for the research organization plan outlined in a discussion draft issued by Committee Chairman Tom Harkin (D-Iowa). That plan would continue the separation ARS and CSREES, but contains a reorganization of CSREES into the National Institute of Food and Agriculture (NIFA).  

The House-passed version of the 2007 Farm Bill contains language that would create a superstructure over ARS and CSREES including six topical administrators reporting directly to the Department of Agriculture’s undersecretary for research, education and economics. NAWG and other groups have adamantly opposed this proposal. 

Other signatories included leaders at American Bakers Association, North American Millers’ Association, American Malting Barley Association, Inc., National Barley Improvement Committee, National Wheat Improvement Committee and the National Corn Growers Association.

AUSTRALIAN CROP ISSUES COULD DIMINISH STOCKS.  by Joe Sowers, USW Senior Market Analyst.  This week, the Australian Bureau of Agricultural and Resource Economics (ABARE) confirmed that drought has damaged its wheat crop for the second year in a row, threatening to reduce supplies dramatically. ABARE pegged Australia’s production at 15.5 MMT, down 7 MMT from its June forecast.  Despite a below-average harvest, ABARE forecasts Australia to export 12.8 MMT, 3.8 MMT more than last year. If accurate, stocks in the country will be drawn down to bin bottoms.  The Australian crop had a promising start after receiving ample moisture in June and July. Since August, however, dry conditions have lingered through the important heading and flowering development stages and cut yield potential. The ABARE production estimate is 31 percent below its June forecast of 22.5 MMT and 5 MMT below Australia’s ten-year production average. 

Although ABARE does not report estimates of stock levels, USDA estimates Australia holds 3.2 MMT of wheat after exporting more than 90 percent of production last year. In MY 2006/07, Australia held record stocks of 9.8 MMT but drew them down to compensate for the shortest crop in more than a decade. If the USDA estimate is accurate and the ABARE forecast turns out to be correct, Australia could draw stocks down to virtually nil by the end of MY 2007/08.