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California Association of Wheat Growers (CAWG)

April 1, 2008

CAWG ANNUAL MEETING SET FOR APRIL 23, 2008.  All CAWG members are invited to attend our annual meeting in Sacramento starting at 1:00 pm. For more information and to RSVP, please call the CAWG office at (916) 492-7066.

FARM BILL FRAMEWORK CUTS TITLE I TO FUND OTHER AREAS.  Despite last week’s Easter Recess, Washington was hopping with farm bill action, with a new funding framework emerging that could further cut funds from the commodity title.  The framework would spend about $10 billion over the farm bill baseline, a number widely agreed to but not yet paid for with offsets, which are required under budget pay-as-you-go, or “pay-go”, rules. 

The direct payment, the program championed most by wheat growers, could once again be threatened due to funding issues. Crop insurance will also see substantial cuts under this framework.  In contrast, nutrition spending under the framework would go up about $9.5 billion and conservation would go up about $4 billion. Specialty crops would gain about $1.3 billion in the commodity title.   The framework out this week is the latest in a series of attempts to reach compromise on farm bill funding issues. Congress is scheduled to be back in session the first week in April; parts of the 2002 Farm Bill have been extended a number of times to allow negotiations to continue, but the latest extension ends April 18.  

NAWG continues to emphasize the importance of the commodity title, particularly the direct payment and crop insurance, to growers and to other priorities like conservation and trade that rely on a stable farm economy.

WRITE CONGRESS TO SUPPORT THE DIRECT PAYMENT!!  Tell your representative and our senators that the direct payment is important !   An internet site has been established to help you write the letter:   

http://capwiz.com/wheatworld/home/

COMMENTS SOUGHT ON RAIL PRICING, COMPETITION ISSUES.  A  internet site has been established to collect comments regarding rail captivity and competitiveness for the Surface Transportation Board.  The site is:  http://www.lrca.com/railroadstudy/.

The comment site allows registered users to post to a discussion forum and submit comments with or without their full identities being known.   The STB commissioned the study upon a recommendation from a Government Accountability Office report on rail competition released in late 2006.  The study is looking to answer whether the recent increase in rates is the result of capacity constraints or the exercise of market power.   The study is also exploring the current state of competition and captivity nationwide, by industry and by commodity; assess current and near-future capacity constraints; examine investment incentives; examine service quality issues and their causes; and present economic analysis of legislative proposals like reciprocal switching, bottleneck rates, elimination of paper barriers and repeal of industry antitrust exemptions. 

 The final report is due to the STB in late 2008.

WHEAT EXCHANGES ADJUST DAILY TRADING RANGE LIMITS.  The Kansas City Board of Trade and Chicago Board of Trade made adjustments in their daily trading ranges last week, effective Thursday evening, March 27.  The two exchanges established maximum daily trading ranges of $1.35 per bushel.

In February, both exchanges and the Minneapolis Grain Exchange announced trading policies that established initial daily trading ranges of 60 cents per bushel. If two or more contracts trade at the maximum limit in a day, the range will expand by 50 percent on the next trading day (90 cents) when the price of two or more futures contract months within the first five listed non-spot contract months, or the final contract month of a crop year, closes at limit bid or limit offer. If the same thing happens the next day, the range will expand again by 50 percent to a maximum of $1.35. If two or more contracts do not trade at the limit, then the process reverses – first to 90 cents, then to 60 the next day if two or more contracts don’t touch the limit.

 The MGEX policy is the same as the CBT and KCBT ranges except there is no maximum limit in Minneapolis.

A joint statement from CBT and KCBT stated that after the previous changes on Feb. 11, market participants requested some additional changes. These included “price limit provisions that expand based on the activity of the front months where the majority of open interest resides, a maximum amount that price limits can expand to, and provisions that allow price limits to contract at the same rate that they expand.” The exchanges believe the policy changes address those concerns.

NAWG is preparing recommendations for the exchanges, the Commodity Markets Council and the Commodity Futures Exchange Commission on ways to make the futures markets perform better and will be submitting those comments at two different meetings in April.

NAWG STAFF CONTINUES MAKING THE ROUNDS ON UG99 FUNDING. 

NAWG and North American Millers’ Association staff met with Gale Buchanan, the undersecretary for research, education and economics at USDA, and Edward Knipling, the administrator of USDA’s Agricultural Research Service, this week to discuss research funding needed to combat Ug99.

Specifically, the groups discussed the Cereal Rust Initiative, the loss of funding for U.S. Agency for International Development (USAID) programs that support stem rust research and the renewal of the Wheat Coordinated Agricultural Program (Wheat CAP).   Ug99 is a virulent rust pathogen that has now migrated from Uganda to Iran and will eventually be blown by wind currents into the wheat producing regions of Pakistan, India and China. 

Ug99 infects the vascular tissues of wheat plants and kills 100 percent of plants infected. The best defense against Ug99 is research to locate resistant genes.  USDA representatives recognized the vulnerability of global wheat stocks and the necessity of developing resistant wheat varieties as quickly as possible. Buchanan indicated pathogen resistance is a high priority in the USDA budget plans.    NAWG and NAMA staff have also met with USAID and Congressional representatives in recent weeks on the Ug99 issue.