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California Association of Wheat Growers (CAWG)

December 17, 2007

AT LONG LAST, SENATE PASSES FARM BILL BY 79 TO 14 VOTE.  Ending a nearly six week impasse, the Senate moved its version of the 2007 Farm Bill Friday afternoon by a 79 to 14 vote.  Much of last week was spent considering the bill, which passed the Senate Agriculture Committee Oct. 25 but has since been delayed on the floor, primarily for procedural reasons.   The bill’s first vote was held Tuesday afternoon on the Lugar-Lautenberg FRESH amendment, which failed by 37-58.On Wednesday, the following amendments failed:

• Sen. Judd Gregg (R-N.H.), on OB/GYN liability, 41-53;
• Sen. Judd Gregg (R-N.H.), to strike a farmer stress provision, 37-58;
• Sen. Judd Gregg (R-N.H.), to strike an asparagus assistance provision, 39-56;
• Sen. Lamar Alexander (R-Tenn.), to increase funding for the Initiative for Future Agriculture and Food Systems,  19-75; and
• Sen. Lamar Alexander (R-Tenn.), to limit a tax credit for wind energy projects, 14-79.

On Thursday, votes failed on three potentially devastating amendments, the Dorgan-Grassley payment limits amendment, by a 56-43 vote; the Klobuchar adjusted gross income amendment, by a 48-47 vote; and the Brown-Sununu crop insurance amendment, by a 32-63 vote.

Now that the Senate has passed its version, the next step in the bill’s journey is the “Conference Committee” where the Senate and House will hash out the differences in their versions.   Some reports indicate that the conference committee will get to work shortly after the New Year, while others don’t expect work to begin until March.  Regardless, the Bush Administration continues to threaten a veto of the bill in its current state.  Interestingly, the Senate vote was more than enough to override a Presidential veto.   

In addition to the Senate’s work, House Agriculture Committee Chairman Collin Peterson announced he will include language in an omni-bus spending bill – that will pass in some form before the end of the year – that will extend farm programs until March 15^th.   baseline.

SENATE APPROVES U.S.-PERU TRADE AGREEMENT 77-18.  Earlier this month, the Senate approved the U.S.-Peru trade promotion agreement by a 77-18 vote. The measure, passed by the House last month, is expected to be signed by President George W. Bush shortly.

The Peru agreement was signed by both countries in April 2006. Implementation has been slow due to the change in Congressional control and demands by Democrats for new labor and environmental standards to be applied in the measure.  Once the agreement is fully implemented, 90 percent of U.S. food and agricultural exports to Peru will enter duty-free and all U.S. exports will eventually enter duty-free, according to the Department of Agriculture.

The agreement will immediately remove all duties on U.S. wheat and durum, giving U.S. wheat producers the same duty free access to the Peruvian market as Peru has to the U.S. market under the Andean Trade Preference Act. U.S. Wheat Associates estimates that increased market access offers a good chance to increase U.S. wheat sales to Peru by nearly $67 million per year at today’s prices.

U.S. TO SUPPLY 1/3 OF IMPORTS; STOCKS FALL TO RECORD LOW.  Joe Sowers, U.S. Wheat Senior Market Analyst.   In its World Agricultural Supply and Demand Estimates release this week, the U.S. Department of Agriculture (USDA) increased the forecast for U.S. wheat exports to 1,175 million bushels (mbu), the highest level since 1995/96. With production problems limiting supplies in every major exporter, U.S. wheat exports are expected to account for 31 percent of global trade – an outcome that will squeeze ending stocks down to bare minimums and sustain record high wheat prices.  

With weather problems this year and stocks already low, production in the five major exporters – the U.S., Canada, Argentina, Australia and the EU-27 – is 772 mbu below the 10-year average. Global imports are only expected to fall 73 mbu below average and that is forcing importers to scramble for supplies. As wheat buyers turn to the U.S., USDA predicts U.S. exports will grow 257 mbu (29 percent) above last year and exceed domestic use for the first time since 1995/96. Export sales in the first half of the marketing year (June 1 to Dec. 6) were brisk with the U.S. selling 1,053 mbu or 90 percent of exportable supplies.

The large jump in exports will leave the U.S. with its tightest wheat supply since 1947. U.S. production in 2007/08 was 73 mbu below the 10-year average and beginning stocks were 220 mbu below average. USDA projects stocks at the end of the marketing year will fall to 279 mbu, which is 404 MMT below the 10-year average. The U.S. will hold only 24 percent of its annual domestic use, our lowest stocks-to-use ratio since records were first kept in 1934.  The tight supply situation has spurred U.S. prices to new highs. USDA estimates the annual average farm gate price will rise to a record $6.60 per bushel, up from $4.26 last year and $3.42 in 2005/06. Export prices, of course, are also up with the most dramatic rise seen in durum and soft white (SW). SW offers from the Pacific Northwest were $12.55/bushel last Friday, two and a half times higher than this week last year and nearly four times higher than in December 2005. Hard red spring (HRS) futures sold on the Minneapolis Grain Exchange hit a high of $11.15 on Thursday, three times higher than two years ago.

ENERGY BILL COMPROMISE WITH STRONG RFS PASSES SENATE.  Energy legislation containing an increased renewable fuel standard (RFS) of 36 billion gallons by 2022 and a 40 percent increase in vehicle fuel efficiency standards passed the Senate Thursday evening by an 86-8 vote.   An increased RFS is essential to the development of commercialized cellulosic ethanol, and NAWG has been vocal about its support for the increase. NAWG joined other organizations involved in renewable fuels in writing leaders of the Senate this week asking for their support of the measure. The Association also signed onto a coalition letter of support for the RFS sent to House Speaker Nancy Pelosi (D-Calif.) last week and provided information for a recent press conference held to show multi-industry support for the measure.

The slimmed-down energy bill will now move to the House for its approval and the White House for Bush’s signature. It is expected to be finalized before the end of the year.