California Wheat Commission  

Home | Directories | Quality Info | Variety Survey | CAWG Update | News/Info. | Laboratory | Links

California Association of Wheat Growers (CAWG)

August 1, 2007

HOUSE PASSES FARM BILL ALONG PARTY LINES; VETO THREAT ISSUED.  H.R. 2419, the Farm, Nutrition and Bioenergy Act of 2007, passed the House of Representatives Friday by a 231 to 191 vote with 14 Democrats voting “no” and 19 Republicans voting “yes”.

After months of tough negotiations made tougher by extraordinarily tight budget authority, a compromise bill passed the House Committee on Agriculture just last week, and was praised by a large, bipartisan group as late as Tuesday, when the House Committee on Agriculture held a widely-attended press conference on the bill.

The compromise bill included a number of key provisions:

• Wheat’s direct payment was kept at 52 cents a bushel, but the bill raised the wheat target price to $4.15 from $3.92 and raised the loan rate to $2.94.

• An adjusted gross income (AGI) limit for farm program payments and conservation at $1 million. For AGIs between $500,000 and $1 million, 67 percent of income must be derived from farm, ranch and forestry. The proposal would also eliminate the three-entity rule, lowering the maximum allowable direct payment to $60,000 and the counter cyclical to $65,000.

• Cuts in federal payment rates to crop insurance companies.

• A pilot revenue assurance counter cyclical program that growers will be allowed to opt into rather than the traditional counter cyclical program.

• Extending and adding additional funding for a number of conservation programs.

• $1.6 billion for fruits and vegetables.

• Language that would create three categories of country of origin labeling, allowing for its full implementation.

By Wednesday of last week, disagreements had surfaced about a tax provision introduced by Rep. Lloyd Doggett (D-Texas) that would be included as an offset for the increase in nutrition spending. While Democrats said this was closing a tax loophole for foreign-owned businesses, Republicans said it was a tax increase that would threaten American jobs in addition to their support of the Committee product.

In addition, Secretary of Agriculture Mike Johanns held a press conference late Wednesday morning to announce that the Committee version of the bill would garner a veto recommendation from him and other advisors if it arrives on President George W. Bush’s desk.

A number of other changes were also made to the bill language before the Committee on Rules passed a final rule for the bill. These included the addition of $840 million in mandatory spending for the McGovern-Dole food aid program and the elimination of $1 billion more from crop insurance reimbursement funds. NAWG continues to seek information about and analyze these last- minute changes and will work with Members in both chambers to ensure policies in the Senate’s bill and the final conference bill are compatible with wheat growers’ goals.

Though serious political fissures hung over the process, the House approved the bill’s rule by a 222-202, largely party-line vote, Thursday evening.

Later, the Kind-Flake proposal was soundly rejected by a vote of 309 to 117. Reps. Ron Kind (D-Wis.) and Jeff Flake (R-Ariz.) had proposed an alternative approach that would have effectively gutted the current farm safety net for most American agricultural producers, jeopardizing producers’ viability the nation’s food security. In the 2002 Farm Bill debate, a similar amendment garnered 200 votes.

Amendments

Several amendments were adopted during the two-day floor process, but few that would affect wheat growers.  Some of the amendments that were accepted include:

• An amendment offered by Reps. Barney Frank (D-Mass.) and Spencer Bachus (R-Ala.) to strike language which would have expanded the lending authority of the Farm Credit System.

• An amendment authored by Rep. David Wu (D-Ore.) to allow universities that do work in alternative energy-related fields such as agriculture, chemistry, environmental sciences, bioengineering, biochemistry, natural resources and public policy to be eligible for the “Biofuels from Biomass Internship Program.”

• An amendment authored by Rep. Rahm Emanuel (D-Ill.) that directs the Department of Agriculture to investigate which estates have been receiving payments in the name of dead farmers and recoup payments made in the name of deceased individuals.

WHEAT AT HISTORIC PREMIUM TO CORN.  by Joe Sowers, USW Market Analyst

This week, the price premium of wheat to corn at the Chicago Board of Trade hit $3.25 per bushel ($119 per MT), up from 50 cents per bushel ($18 per MT) in February. The price spread between wheat and corn is important because wheat prices tend to be supported by high corn prices. When wheat prices are significantly less than corn, livestock producers may feed more wheat in place of corn. However, the wheat to corn spread has widened, leaving wheat supply and demand fundamentals as the primary support for current strong prices. At least for the next few months, wheat prices appear to have no downside support from corn.

Since mid-June, corn futures prices have fallen nearly 30 percent, from a high of $4.30 per bushel to $3.08 this week. With favorable weather continuing in the U.S. Corn Belt and planted area up 19 percent this year, an enormous harvest is expected. On the other hand, weather in the major wheat exporting countries has been a challenge. From drought in the Ukraine and Eastern Europe to rains in the U.S. Southern Plains and Western Europe, higher planted acreage will increase production much less than originally anticipated. Disappointing production compounding already short exportable supplies are pushing world wheat prices to historic levels with French wheat prices at all-time highs and U.S. prices at an 11-year record.  The growing price spread between wheat and corn and the lowest world wheat stocks since 1981 suggest wheat prices appear to have no downside support from corn. The wheat to corn price spread is similar for HRW and HRS.