| Issue 15 September/ October 1998 |
News & Views From the Wheat & Barley Growers |
| Error! Bookmark not defined.Library Error! Bookmark not defined.Error! Bookmark not defined. Error! Bookmark not defined.Error! Bookmark not defined. Error! Bookmark not defined.Back Prairie Grains is the |
Preventing the farm
crisis from happening again Somewhere between last spring and this summer, the farm crisis that has been festering in this region became a national issue. I have mixed feelings about this. Thanks to Northern Plains lawmakers and farm organizations, including the Minnesota Association of Wheat Growers, the national media and many more federal lawmakers have tuned into our plight, fueling remedies that are being discussed. But in the process, the cause of our problems has been convoluted by political rhetoric and finger-pointing. We are looking for someone or something to blame, and the new farm bill has become the farm crisis effigy for some. However, USDA Secretary Glickman said himself when he was in Grand Forks in June that this is a "confluence of problems," that being a global glut of grain increasing supply, the unexpected downturn in Asian economies and subsequent stronger US dollar that has decreased demand, all hitting us square on the chin after five years of scab. While some say the new farm bill is a terrible idea that needs to be scrapped, others say it's a novel program that just needs time to work. I think the answer is neither here nor there but somewhere down the middle. We've got a road built about three years ago, if I may use an analogy, and now we're starting to see a few potholes. Let's fix the potholes, but it might be unnecessary to repave the whole road. Freedom to Farm was built on a much healthier export forecast than what we have now. No one anticipated the fallout of the Asian economy, or for that matter, the flak about fast-track and the near imposition of trade sanctions against Pakistan and India. Furthermore, the 1996 Farm Bill came with a Congressional promise to build better export markets, boost ag research, and improve crop insurance. None of that has transpired. Research and a change in weather will solve scab. The MAWG is strongly urging changes to make federal crop insurance better, and that self-imposed sanctions and unfair export competition be resolved. We commend lawmakers for already taking steps to move these policies in the right direction. However, the fruits of these changes will occur over the long-term. But with five years of scab and now poor prices, farmers in this region have financially run out of time, and need help now. Thus, short-term relief is justified. An emergency assistance measure would not compromise the principles of Freedom to Farm; rather, it would allow the forementioned bumps in the road-- scab, problematic crop insurance, and unfair export competition-- to be fixed so Freedom to Farm can work. Fixing those items should ensure that this type of farm crisis doesn't happen again. We as farmers can also do a better job of protecting ourselves in the marketplace. Some farmers this harvest are quietly going to sell new crop wheat at $4.00 and soybeans at close to $7.00 from pricing actions they took before the growing season. Unfortunately, a lot of us still sell at the mercy of the cash market, despite the lickings we've taken time and time again that should serve as lessons to price differently. A lot of us are still sitting on 1997 grain we should have sold long ago. I have actually heard of some farmers this harvest who are still sitting on grain from 1996, when wheat was $5.00. You can't blame Freedom to Farm for that. Tim Dufault, MAWG president US wins a barley battle, but needs plan to fight trade war When news broke last spring of a sale of heavily subsidized Finnish barley headed for the California feed market, US barley growers responded with the highest level of political scrutiny that I can recall. Barley farmers amazed the Washington and Brussels establishments by taking valuable time away from home during planting season to come to Washington, DC and express their frustrations. In my opinion, their polite but determined protests outside of the Embassy of the European Union, the White House and USDA, and at the California unloading dock, helped convince political officials that inaction was unacceptable. The result was unparalleled interagency support for a retaliatory strike into key European barley markets. The official US response, the strong letters from Secretary of Agriculture Glickman and Secretary of State Albright along with the announcement of a 30,000 MT barley EEP (Export Enhancement Program), sent a definite message to the European Union. While the EU has taken no official action to prevent a recurrence, it would appear that European officials will pay a great deal more attention to the potential destination of future sales. Obviously, though, the battles are not yet over. Recall that EU agricultural commissioner Franz Fischler explained the market rationale for the initial shipment by pointing out that US grain prices were higher than world prices so foreign suppliers were only within their rights in seeking the highest prices for their commodities. This explanation, on its face, would appear to be a valid testament to free market economics unless one questions the initial premise. Why are US barley prices higher than world prices? Trade tools to limit imports have largely been eliminated in previous trade agreements, though we continue to seek greater transparency in the operation of state trading enterprises such as the Canadian Wheat Board, that can have a distorting impact on domestic and global markets. Production-based price deficiency payments that might have been blamed for a 'price bubble' in the US are a thing of the past. From my perspective, any real difference in US and world prices in recent years (beyond quality and transportation advantages for domestic producers) is directly related to the absence of the EU from our markets. Global markets for barley have for years been a battleground between the direct subsidization of surplus EU stocks and the market distorting cross-subsidization practices of state trading enterprises. In short, the EU and the CWB have driven world prices down in that competition. Conversely, the US market has been somewhat insulated from that competition because the EU has not attempted to market its surplus stocks in our domestic market. Without pressure from the EU, the CWB has generally shown more restraint in marketing its barley into the US. While this does not mean that the CWB's persistent undercutting of US prices is not price-distorting, the absence of the EU from US markets has limited that distortion. As a result, US prices have been slightly higher than world prices. Obviously, then, allowing the initial sale last spring to become a precedent for future sales would have had a devastating impact on the US grain market. Once those two grain marketing juggernauts begin competing on US soil, US prices will plummet and US farmers will leave the barley production arena in droves. Anyone who doubts that Canada and the EU could drive US producers out of their own market should try to find a US oats producer. It has reached the point that Canadian trade officials visiting Brussels complained to EU officials about the impact of subsidized EU oats sales in their US oats market. This is the crux of the problem facing US barley producers. This is the very real economic danger that led producers to take up signs in Washington, DC to warn US and EU policy makers that they will not sit idly by while others destroy their livelihoods. As a result of that effort, US trade officials have a new understanding of the potential harm in maintaining a unilateral laissez-faire trade policy that fails to respond to the predatory pricing activities of our so-called trading partners, particularly when those predatory actions are taking place on our home turf. Now it's time for US agriculture to stand up and acknowledge that the Emperor has no clothes: our trade officials do not now have the tools to fix the mess of trading problems that are constantly demanding their attention. We constantly urge our trade team to get Canada, Australia, Brazil, Argentina and the EU to the negotiating table to fix various problems, but we have failed to provide the fast-track authority that has become the de facto entrance requirement for new negotiations. We express concern about the deteriorating marketing prospects in promising Asian markets, projected to result in a $35 billion increase in the US trade deficit, but fail to provide the IMF funding necessary to support any revitalization of those markets. We put ourselves in a marketing headlock with misguided trade sanctions that push some of our better grain customers into the arms of other sellers, harming only ourselves. These are things we need to fix in order to open up markets for US products and to put an end to some of the market distorting practices that our trade competitors utilize against us. Hopefully, Congress will try again this fall to approve IMF funding, sanctions exemptions for agriculture and fast-track authority. If we give them authority under fast-track to negotiate and a set of attainable goals, we (and Congress) will then be able to judge their efforts when they bring back trade packages for legislative approval. If agriculture is not happy with the final product(s), we can join with our congressional supporters in a fight against such an agreement. If we don't prepare USTR and USDA for the negotiating table, though, there can be no real relief from the persistent trade problems we face today. The US has proven itself with the subsidized EU feed barley sale, that when pushed unfairly in the grain trade arena, we'll push back. Now let's send our trade officials to the multilateral negotiating tables with a mission to get more wins for US agriculture. Jack Q. Pettus, legislative consultant NDGGA lobbies Capitol Hill officials on farm economic remedies North Dakota Grain Growers Association Executive Director Lance Gaebe, NDGGA vice president Allan Skogen, Valley City; and myself made a lobbying visit to Capitol Hill this summer on behalf of the NDGGA, which couldn't have been more timely. It was at the peak of Capitol Hill discussions on farm economic assistance measures. Our prominent message to lawmakers and federal officials: Indeed, times are as tough as you are hearing in North Dakota. As well, we must have a plan to create more markets and market share for wheat and barley. The 1996 Farm Bill is under attack by many. But we explained that it can work, if the government comes through on the agreements that were made with its passage. Namely, a stronger emphasis on: 1) regulatory relief; 2) trade; 3) research; 4) risk management. With Gov. Ed Schafer’s assistance, we met with ranking House and Senate Ag Committee members, Speaker Gingrich’s agriculture advisor. We were also fortunate to join the Governor in a visit with Senate Majority leader Trent Lott. We urged lawmakers to recognize the financial plight and to support any measures to send disaster assistance to North Dakota. These meetings occurred the day before Sen. Conrad’s $500 million disaster aid package was accepted by the Senate. We firmly believe that this amendment was accepted by Republicans in part as a result of our lobbying visits. Gov. Schafer and our congressional delegation, Sens. Conrad and Dorgan and Congressman Pomeroy, all played key roles in bringing our farm economic problems to the attention of Washington. It's unfortunate that politics won't allow them to share the credit. We explained to lawmakers and ag officials how and why farmers are struggling to make a living in North Dakota. We emphasized that the disease, weather and market pressures are forcing many folks out of business. The staff people were interested in our ideas for helping alleviate the tough situation, and were genuinely concerned about what the Congress could do to help. We urged them to realize that the price does not cover cost of production, and that we need short-term help with financial assistance in the state, and a long-term emphasis on more grain exports. We emphasized that the farm program can work for ND farmers; We pointed out that the farm program has brought nearly $600 million to the ND economy, and it has allowed tremendous flexibility for farmers. But it does need adjustments to work better. The loan rate, for example. The $2.58 loan rate cap is really inequitable for wheat, representing barely half of the break even cost of raising a crop, and that corn and soybeans both have higher loans when compared to cost of production. The NDGGA wants to see the loan-rate cap removed, since it would mean more dollars for ND farmers. Unfortunately, there is little sentiment in Congress for uncapping the loan rates. The price tag for such a move is just too high for the conservative majority: Congressional Budget Office estimates project appropriation costs from $3 to 5 billion. This is an issue that continues to be embroiled in partisan politics. Long-term: expand export potential We explained to all of the officials with whom we met that an emphasis on trade and increasing grain exports was crucial to our region’s economic survival. We urged lawmakers to focus on expanding our export potential with better and fairer trade deals and using the Export Enhancement Program, GSM credits, donating grain to hungry nations, and limiting the trade distorting practices of the Canadians, Europeans, and Australians. At each visit we also urged the officials to support efforts to remove sanctions placed on 11% of the world’s wheat market. Our government places sanctions on these countries for humanitarian or terrorist violations, but the only people that get hurt are American farmers. The bill to allow the credit sales to Pakistan and India passed the House and was signed by the president while we were in Washington, and there seems to be a real sentiment to continue lifting some of those sanctions. The arguments made during the debate on lifting them for India and Pakistan will carry over to the case of lifting sanctions placed on other counties such as Iran, Iraq, North Korea, Libya and even Cuba. We implored trade negotiators to approach the next world trade negotiations with a plan in hand for how to reduce the impact of the single desk sellers and the subsidizing habits of the European Union. We criticized trade negotiators for not having a strategy for dealing with the price manipulative practices of our largest competitors. I had a copy of the Canadian ag negotiation strategy during the next World Trade Organization Round, which I obtained at an Ag Summit in Ottawa earlier this year. I referred to it in a meeting with USDA and the US Trade Representative trade negotiators: Here is the Canadian plan for the next trade talks, where is ours? They know how they are going to respond to US requests to limit the Canadian Wheat Board, but we don’t even know if that is what the US game plan is going to ask for! We strongly urged officials to develop a plan and include wheat growers in developing that plan. We reminded Republican lawmakers of the pledges that accompanied the Freedom to Farm Bill, including better crop insurance, regulatory relief and more research. Our strongest emphasis regarded trade, however. Both short and long term, you have got to sell the grain and keep stocks down to keep the price strong. We suggested funding programs like the EEP to very high levels like $1 to $2 billion: even if there is no intention of using the money, we likened it to an arms race where competing countries stock pile an arsenal in order to scare the others into not using them. When fear of a trade war was mentioned, we responded that in fact, we are already in a trade war, and we are losing. We are being beaten by subsidies and single-desk selling practices of our export competition, and something must be done about it. Mark Gage, NDGGA President MWRPC goal: better communication about checkoff with producers My name is Bruce Hamnes, and this summer I assumed the chairmanship of the MWRPC board of directors. I have been actively farming near Stephen, MN all my life and many of you know me from my involvement in both the MWRPC and before that, the Minnesota Association of Wheat Growers. I've been involved in one way or another with these two wheat organizations for over 12 years. It has been a considerable time commitment, but you can't change anything unless you get involved, and I guess that's why producers serve on the MWRPC board. As a wheat producer, I want to do what I can to help the wheat producer become more profitable. That's also why many producers support the wheat checkoff, to help the wheat industry whether it's promoting greater wheat consumption domestically and overseas, or researching ways to decrease production problems or increase production potential. The checkoff, quite simply, is wheat growers helping wheat growers. The wheat checkoff is in place not only to build opportunities, such as the value-added effort by assisting in the development of United Spring Wheat Processors, but to help get our wheat sector back on track when it's down. The wheat checkoff responded to the scab problem with a massive research focus. Minnesota led this effort, to the point where scab research is now a national agenda. The effects of research take time and patience, but we are already seeing results with better transitional varieties, and more knowledge of management strategies, such as the use of fungicides. How is the wheat checkoff addressing low wheat prices? We first need to understand the problem, and our market slump is largely the effect of: 1) oversupply of not only wheat but other grains domestically and globally, 2) reduction in US wheat demand due to the Asian economic crisis and our strong US dollar, which makes wheat from competing countries less expensive. It's difficult for the wheat council to influence macroeconomic factors such as these, but together with checkoff funds from other states, we are working through US Wheat Associates to, in the short-term, make it easier for Asian countries to buy our wheat. As well, we are trying to allow US wheat to be sold to other countries which cannot buy our wheat now because of US self-imposed economic sanctions. Longer term, we continue to fight unfair trade practices of competing countries and develop markets through a commitment to trade and technical servicing and consumer promotion. Over half of our wheat needs to be exported, that's why we place such a great emphasis on overseas market development. But we recognize too that our largest customer is our own backyard. That's why the wheat checkoff supports the Wheat Foods Council, which promotes wheat consumption domestically. Since the WFC's inception in 1972, when flour disappearance was at an all-time low of 110 pounds per person, per capita consumption has increased 40 pounds or 36%. During my term as MWRPC chair, I have placed a priority in communicating more closely with producers, of results and ongoing activities and programs of the wheat checkoff. I say "with" producers, not "to," because communication is a two-way street. The MWRPC needs to tell you when, why, where, and how it spends your checkoff dollars. At the same rate, you need to tell the MWRPC when, why, where, and how you want your wheat checkoff dollars spent. As I mentioned earlier, we can accomplish change and opportunities in the wheat industry through the wheat checkoff, but we have to take it upon ourselves to get involved, and your feedback and input is needed in this process. We welcome your calls at our office, 1-800-242-6118. That phone number will also help locate MWRPC board directors in your area. You can contact me by email: bhamnes@ruralaccess.net. Bruce Hamnes, MWRPC Chair |
Copyright Prairie
|
|