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News from the Minnesota Association of Wheat |
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U.S. WHEAT DELEGATION TO CWB North Dakota Wheat Commission Chairman Alan Lee is among a delegation of U.S. wheat
representatives meeting today with the Canadian Wheat Board in Winnipeg to discuss how the export monopoly's price-cutting and other predatory marketing practices are hurting Canadian farmers as much as they hurt U.S.
farmers. "Every time the CWB undercuts market prices anywhere in the world, it is not returning to Canadian farmers the full value of their wheat," says Lee. These cutthroat tactics rob U.S. farmers of
sales opportunities, he says, and lower U.S. wheat values by driving down world wheat prices. He points to a study commissioned by the Organization for Western Economic Cooperation in Saskatchewan that shows
Canadian spring wheat and durum growers have received $.50 to $.75 per bushel less on average than American farmers. Lee's assertions are backed up by well-documented examples from U.S. Wheat Associates employees who
are in constant contact with the world's wheat buyers. USW President Alan Tracy informed CWB directors of several incidents of price undercutting by CWB sales people, citing specific transactions in the United
Arab Emirates, Sri Lanka, Guatemala and the Philippines. On the home front, U.S. imports of Canadian durum wheat reached a record 20 million bushels in marketing year 1998-99, and already stand at 11 million bushels
half way through the 1999-00 season. Imports of Canadian spring wheat totaled 48 million bushels last season and as of November stood at 22 million bushels for 1999-00. "Unless proven otherwise, it
appears Canada is using its same price-cutting techniques to capture U.S. market share," Lee says. U.S. Wheat Associates has been pushing for reform of State Trading Enterprises (STEs) like the CWB through the
World Trade Organization. Although the United States and Canada have many common concerns in the WTO, including formidable European export subsidies, USW Chairman Chris Shaffer said, "? the monopoly status of the
CWB drives us apart." The export subsidy effect of the CWB itself remains to be quantified, but a USDA Economic Research Service economist and a professor at Stanford University have developed a classification
system for STEs that gauges their capacity to distort international trade. The researchers classified the CWB has a Type IV STE, meaning its has the highest potential for trade distortion because of its control
over both domestic and external markets. "The Canadian farmer has "virtually no say in how his or her wheat is marketed and priced," Tracy noted, making it clear that the U.S. wheat industry expects
Canada to end its government-backed monopoly. "If you do such a great job, why be afraid of a little competition for the Canadian farmers' business?" he challenged the 15 CWB directors. "With the
best interests of your producers as your goal, why not let those producers sell to whomever they choose? Why not allow them the option of timing their own sales, to have the opportunity to capture the market highs
along with the risk of market lows?" Not holding out a lot of hope for a positive response from the CWB, the North Dakota Wheat Commission is continuing to work with a trade attorney to gather the economic and
pricing data necessary for a legal trade remedy. Other U.S. wheat representatives present for the challenge to the CWB were USW Vice Chairman Bruce Hamnes, Stephen, Minn.; USW Secretary-Treasurer Henry Jo Von Tungeln,
Calumet, Okla.; and Wheat Export Trade Education Committee Executive Director Barbara Spangler, Washington, D.C. For additional background information, contact NDWC Public Information Specialist Ellen Huber, phone
701-328-5111. * * * * * * * * * * * * * * * * * * Ellen Huber
USW CHALLENGES CANADIAN WHEAT BOARD "Ask your wheat producers if they want freedom to market" U.S. Wheat Associates president Alan
Tracy, meeting today with the Canadian Wheat Board in Winnipeg, charged the Canadians with undercutting prices and distorting markets, and pointed out that those practices are hurting Canadian wheat producers as much as
they harm international wheat trade. "We in the U.S. wheat market have a serious problem with your monopoly status and the way it is used to compete," Tracy informed the Board. He gave numerous
examples of price undercutting by CWB sales people, citing specifics in the United Arab Emirates, Sri Lanka, Guatemala, and the Philippines. The Canadian monopoly, he pointed out, "is trade distorting, unfair to
your competitors, unfair to your producers, and out of step with the modern, market oriented world." Tracy explained how Canadian undercutting in foreign markets hurt Canadian producers. "Every time your
sales people sell wheat at below its market replacement cost, they are selling your producers' wheat for less than it is worth." The Canadian farmer has "virtually no say in how his or her wheat is
marketed and priced," Tracy pointed out, and he exhorted the Board to give Canadian wheat producers a choice. "It's time for another referendum vote -- with a clear and explicit choice. Freedom to market
or the status quo?" Tracy challenged. "Ask your producers if they would prefer to continue selling and shipping through the mandatory pooling system, or whether they would like to have the market freedom to
sell to whomever they choose. Give the grain producers of Canada that choice today. Aren't they who you are working for?" Tracy and USW chairman Chris Shaffer were invited to address CWB members, and Tracy
acknowledged that it "may be presumptuous to accept the invitation and then criticize the way CWB does business." But he wanted to "make the most of this welcome opportunity," he said.
Not all the discussion was about the CWB monopoly -- there was also discussion on how European Union export subsidies are hurting all North American wheat producers. Chris Shaffer, USW chairman, gave the USW
perspective on World Trade Organization issues and said "the U.S. and Canada face many challenges in common." The clear message to the Board, however, is that the U.S. wheat industry expects Canada to end
their monopoly. "We face many of the same issues in the WTO," Shaffer said, "but the monopoly status of the CWB drives us apart." "You can fix this problem so that we can finally work together
on issues for all North American producers," Tracy concluded. ----------------------------------------
ALAN TRACY
President of US Wheat Associates, Inc. Greetings, ladies and gentlemen of the Canadian Wheat Board. It is an honor and a pleasure to
be with you today. I want to thank Minister Ralph Goodale, whose speech to our USW Board nearly a year ago led to this invitation, and to Greg Arason and his competent staff for making this meeting possible. It
may be presumptuous of me to come here today, at your invitation, toaccept your hospitality, and then to criticize the way you do business. Yet, despite the many things we have in common, such as our mutual desire to
eliminate export subsidies and to open global trade, we in the US wheat industry have a serious problem with your monopoly status and the way it is used to compete, both in the US market and overseas. And I think
it is healthy to be open about it, to make the most of this welcome opportunity to exchange our viewpoints, and to try to seek common ground, or at least mutual understanding, even in the most problematic areas. The
relationship of our two national wheat industries is long and complex. We produce nearly identical products that compete in the same global marketplace. We both rely heavily on the export market and, for both of
us, exports are the primary hope for our future growth and prosperity. As nations, we have chosen different paths to approach the export market, and strong competition between us is to be expected. But trade
should be reasonably fair. We both have a right to expect that our competition be based on international rules and standards, such that each of us has the opportunity to utilize our natural advantages in a
marketplace free of major distortions. That's why we both oppose Europe's export subsidies, which are perhaps the most egregious of trade distortions. Our wheat production and marketing systems have a host of
differences. We have different farm financing programs, crop insurance programs, disaster relief, conservation, storage, transportation, and price support programs. All of these have some impact on production
and competitiveness, and as such they do have some ultimate impact on trade flows. However, even taken together, they don't hold a candle to Europe's protected agriculture with its high price supports and
payments, which dramatically boost production and grossly distort trade with the subsidized overflow. Indeed, the OECD calculates US and Canadian farm support per acre as nearly identical (although the US is
higher for wheat), and way below European levels. While there are legitimate issues in contrasting US and Canadian farm support programs and their impact on trade, and they should be sorted out eventually in the WTO
process, I'd like to leave that discussion for another day. Our major concern with the CWB, and the AWB as well, is price undercutting to win markets. I know you've been told that you don't do that, but the fact
is that your sales people do indeed undercut world market prices, regularly, persistently, and sometimes, egregiously. When they do that, it distorts trade flows, it is unfair to your competitors, such as the US
farmer, and it is also unfair to your own producers. Because, every time your sales people sell wheat at below its market replacement cost, they are selling your producers' wheat for less than it is worth. Your
professional staff have long acknowledged that you use differential pricing, that the same products at the same time can be priced differently in different markets, beyond mere transportation differentials. The US
has even helped create that opportunity, with our foolish and shortsighted tendency to impose unilateral trade sanctions around the globe. While we were refusing to trade with Iran, for example, your staff were
able to secure substantial premiums as the only remaining steady supplier of hard wheat. That allowed the CWB to lower the price in other, targeted markets while still showing a reasonable average return.
Hopefully, the US will soon stop shooting itself in the foot this way, and your opportunities for premium pricing will fade away. We have already administratively lifted sanctions for food (and medicine) to Iran,
Libya, Sudan and North Korea, and we are working on legislation that would prohibit such sanctions in all situations, short of war. We've also recently solved phytosanitary concerns in China, Chile and Brazil,
further reducing your premium opportunities. In some of these markets, our exporters are now benefiting from a reaction against what is viewed as former price gouging by the CWB. My point is that the opportunity
for your staff to mask their price cutting with premiums is fading away. USW employees around the world are in constant contact with the world's wheat buyers. My people know what is going on in the marketplace,
and while it is often difficult for us to document, we know as fact that CWB sales personnel regularly offer wheat at well below the cost for US wheat that meets the same specifications. We have some examples well
documented. Last March a buyer in the United Arab Emirates bought CPS for $115 and CWAD for $169. US wheat quotes for the same specs were $120.28 and $175.40. In November, the CWB sold Sri Lanka Canadian
Western Red Spring at $144.65, well below offers for US HRW in the same tender, which ranged from $148.64 to $153.43. Offering spring wheat priced with our lower protein winter wheat is a common
practice. Last year in the Philippines, a largely US market we have built and cultivated through long years of work, millers informed us of a standing offer from the CWB to match any US offer with the same spec
wheat at $7 per ton under the US price. In a business where ten cents a ton can decide a sale, these 5-7 dollar differentials cannot be explained except as buying the business by giving away some Canadian
producers' wheat. Price is not the only way the CWB undercuts the market. Frequently, you "over-deliver" on contract specs, such as protein, thus giving away value that might have otherwise been
captured by your producers. You clean your wheat, a marketing strategy for which I commend you, and it gives you an advantage in some markets. But you still normally price the wheat at or below US prices,
giving away the cleaning. Studies show that your transportation and handling costs are generally higher than those in the US, which is not reflected in your pricing. Studies also show that producer returns
average higher in the US, corroborating that some portion of your wheat is essentially given away to buy markets, more than offsetting premiums secured in a few places. And that leads to questions about the price
at which Canadian wheat is sold in the US market, how those prices are derived and how they compare with the same wheat sold elsewhere, even in Canada. At the very least, there needs to be more transparency to
assure producers in the northern US that competition from Canada is fairly priced in the US market. Put yourself in the position of a "Main Street businessman," whatever the product line, where your leading
competitor has no discipline of profit or loss; his product cost will be adjusted to offset his marketing costs, no matter at what price he sells. You'd run screaming to Ottawa! That's essentially the
position the US farmer finds himself (or herself) in trying to compete with the wheat boards. It is an untenable position, unfair to the core, so don't be surprised when Minnesota farmers go running to Governor
Ventura to help them out! And, in the export market, where my people work, all our efforts are in vain if the CWB makes an administrative decision to take a market away, as you did last year in Guatemala, for
example. The odd part is that this price undercutting is equally unfair to the Canadian farmer, who, except for the few of you on this board, has virtually no say in how his or her wheat is marketed and
priced. Again, every time you sell wheat below its world market replacement cost, you are giving away some of the producers' money. And, as a trade practice, it can be just as trade distorting as an export
subsidy, completely taking away a market. The counter-argument I hear is that the CWB does a great job, using its monopoly marketing power and its administrative pricing power to achieve maximum returns from the
marketplace. You protect your farmers from low harvest prices and short term price bottoms, and save them from the "selfish" international grain companies. Well, frankly, if you do such a great
job, why be afraid of a little competition for the Canadian farmers' business? With the best interests of your producers as your goal, why not let those producers sell to whomever they choose? And, why not
allow them the option of timing their own sales, to have the opportunity to capture the market highs along with the risk of market lows? With true competition for your producers' supplies, the market will find a
price which returns to your farmers the true value of their wheat on any given day, and there are still ways they can spread their pricing over the whole year if they so choose. If, over time, the CWB returns the
best value to your producers, the CWB will prosper in the face of such competition and be better for it. I have no question that the CWB is capably managed, but you can test your efficiency and prove it through the
discipline of the marketplace. Our experience is that no individual or small group of people can consistently outguess the market. In MY98, the CWB pushed its wheat out early, pricing very aggressively, and
got the best of a falling market, making administrative pricing look like wise policy. The next year, your people held off, refusing to even offer some wheat classes to some buyers, and got burned as prices
continued to fall. Because of your supply monopoly, you are not rewarded for your smart marketing decisions nor punished for your mistakes. However, if your producers are granted the market freedom to make
their own selling decisions, that will impose a powerful measure of your performance that does not exist under the current system. It is basic to the way markets work that competition for farmer supplies will
serve to maximize your total producer returns. I realize that a transition to open procurement is much more easily said than done, but it can be done, perhaps with some gradualism to ease the transition for both
producers and the markets. The wheat market is changing, and it's time to go back to your producers to ask what they want. It's time for another referendum vote -- with a clear and explicit choice. Freedom to
market or the status quo? Ask your producers if they would prefer to continue selling and shipping through the mandatory pooling system, or whether they would like to have the market freedom to sell to whomever
they choose. I challenge you, as industry leaders, to give the grain producers of Canada that choice today. You have plenty of wise people who can work out the details of a transition to an open market, if
that indeed is what your producers decide. ASK THEM. I think they know it is time for a change. Aren't they who you're working for? The CWB and USW are facing many of the same issues in the
WTO. We need to work on those issues, together. But the monopoly status of the CWB drives us apart, and we can't just gloss it over. Your monopoly power is trade distorting, unfair to your competitors,
unfair to your producers, and out of step with the modern, market oriented world. You can take steps toward ending the monopoly. You can fix this problem so that we can finally work together on issues for all North
American wheat producers. I hope that these comments will stir some thought, and perhaps, eventually, some action from the members of this Board. Thank you for your time and attention, and I look forward to the rest
of our visit here with you.
NEWS FROM CHINA A recent news wire article indicates China's chief WTO negotiator, Long Yongtu, was recently quoted in a local newspaper as suggesting
that China may not import US wheat or meat after joining the WTO. Trade negotiators from both sides reached a landmark agreement last year paving the way for China's entry into the WTO, while requiring China to
set a tariff-rate quota providing low-duty access for 7.3 MMT of US wheat annually. Speaking to a domestic audience, Long reportedly said it was a "complete misunderstanding" to expect China to actually
import the grain, and the agreement only provided the theoretical opportunity for importers to make sales. In addition, the agreement also says that the US Congress must approve permanent normal trading status for
China. Long's alleged comments have prompted Representative Byron Dorgan, D-N.D., to ask US Trade Representative Charlene Barshefsky to require an explanation from the Chinese. Eyeing the upcoming permanent
normal trading status vote, Dorgan wants Long to clarify China's intention about wheat and meat imports.
THE TAX RAMIFICATIONS OF QUITTING FARMING Haugen says that anyone planning to get out of farming should focus on three important elements: inventory liquidation, sale of capital assets and the possibility of debt
forgiveness. More on this article can be seen at Both Arthur and Commander will significantly influence navy
bean production in Minnesota and North Dakota, as well as other areas in the region, says Al Schneiter, chair of the NDSU plant sciences department.
TOP 10 CROP INSURANCE CHANGES IN 2000 The 2000
multi-peril durum price is the same as the spring wheat price of $3.15. The CRC durum and spring wheat prices will not be announced until March 10 because they are calculated based on the average of Minneapolis futures
in February. However, September durum futures closed at $4.00 on January 13 while spring wheat September futures closed at $3.49. That indicates a slightly higher guarantee for durum CRC may be expected over
spring wheat CRC. 2) Are fall-seeded spring crops insurable? 3) Premium discount of 25% applies in 2000 4) Minor premium rate adjustments
5) Coverage expansion for some crops 6) Written agreements provide "tailor-made coverage" 7) Quality adjustment changes 8) Azure dropped, Foster added
9) Higher buy-ups for corn, beans and beets 10) Better regional information and outreach See your crop insurance agent for more specific details on adjustments to final planting dates, production practices, expanded coverage for various crops in
different counties, and other facets of crop insurance.
TOP FIVE ISSUES THE MAWG WILL BE TRACKING IN 2000 The U.S. House already passed a bill, HR 2559, last October. It is known as the Combest Bill, after House Ag Committee Chair Larry Combest of
Texas. Among its features, the bill would offer improved coverage at better rates, offer risk management tools to livestock producers, and limit reductions in insurable yields due to crop losses from a natural
disaster. Under this bill, 60% of the county's average yield would be the lowest yield assigned to a farmer for a crop year when actual production history is calculated to arrive at insurable yields. The
bill now awaits conference with a plan in the Senate, where there are two leading proposals, a plan sponsored by Senators Pat Roberts of Kansas and Bob Kerrey of Nebraska, and a bill sponsored by Senate Ag Committee
Chair Richard Lugar of Indiana. The Roberts/Kerrey bill is similar to Combest's House bill, but would include more administrative changes to the federal crop insurance system itself, as well as more pilot
programs to test new ideas, such as coverage for livestock, specialty crop, and low-risk producers. The Lugar plan would offer producers direct payments in exchange for implementing certain risk management practices. The MAWG and the National Association of Wheat Growers supports the Roberts/Kerrey plan, as it offers the best coverage to wheat growers nationwide. We expect federal crop insurance legislation
to be taken up in earnest late spring or early summer. A melding of the similar Combest and Roberts/Kerrey plans would move faster in Congress than a marriage of the Combest and Lugar plans. One possibility
in the Senate is that Lugar's plan could be included in the Roberts/Kerry bill as a pilot program. Any legislation would likely begin in the 2001 crop year. Along with keeping crop insurance reform efforts
moving along, another key objective of is to keep the budget resolution that earmarks $6 billion to reform intact. 2) Federal farm bill changes/Market loss assistance How a counter cyclical payment might work: The fact that it is an election year will both
hurt and help efforts to reform the farm bill. On one hand, lawmakers will be more likely to listen and to act. Control of both the Senate and the House is up for grabs, and the rural vote still matters much to
both Republicans and Democrats. On the other hand, legislative work will be cut short by campaigning. What might happen is that federal lawmakers might propose a tune-up to the farm bill to take effect in
2001, and simply pass another market loss assistance package this year. 3) Budget surplus makes MN farm assistance promising 4) WTO Negotiations
5) Membership
CROP DISASTER PROGRAM SIGNUP ENDS FEB 25 The CDP covers insured crops at 65% of crop insurance market price elections, uninsured crops at 60% of crop insurance price
elections, and noninsurable crops at 65% of the 5-year average National Agricultural Statistics Service (NASS) price. Advance payments at 35% of the total projected CDP payment will be issued when a complete application
is approved. CDP benefits are limited to $80,000 per person. Further information is available at local Farm Service Agency offices.
CROP DISASTER PROGRAM QUESTIONS AND ANSWERS COMPILED BY THE ND FSA OFFICE 1.
What are the eligible disaster conditions? 2. When and where will applications be taken from producers? 3. When will payments be issued?
4. What rates will be used to calculate payments? b. 65 percent of the NASS 5-year average
for non-insurable crops c.. 60 percent of the maximum established Risk Management price for uninsured crops.
Note: Crop Revenue Coverage prices cannot be used. 5.
Will payments be factored? 6. Which crops are eligible for
assistance under the 1999 single-year provisions? 7. Will pasture losses qualify for assistance? 8.
Will assistance be available for prevented planting? 9. Is there any loss threshold? 10. Under the 1999 Crop Disaster Program, will FSA use an "historic" yield for
determining the 1999 production loss? 11. Under the 1999 Crop Disaster Program, must a producer provide actual yield history
or can the producer simply accept the NASS 5-year average yield or the STC-established yield for the crop? 12. Are quality losses covered under this program? 13.
Will eligibility be calculated on a farm or unit basis? 14. For the 1999
Crop Disaster Program, will harvested and unharvested payment factors apply? 15.
Are conservation compliance provisions applicable? 16. Is there a payment limitation? 17. How do signed crop insurance waivers affect eligibility? 18. Will producers be required to purchase crop insurance in future years? 19. Are producers eligible for this program
if they are also receiving benefits under different programs for the same disaster? 20. What
year's gross income will be used to determine if the $2.5 million annual gross income limitation is exceeded?
21. If no appraisal was performed for a crop, what will be required of an applicant to verify acreage not harvested?
22. What kind of production evidence is required? 23. Some producer are going out of business because 1999 was such a disastrous
year. If they apply for their 1999 losses but will not be continuing their insurance coverage because they are no longer in business, can they qualify? 24. If a producer had insurance in 1999, is the producer exempt from taking insurance in 2000 and 2001?
25. Will applications be processed for each shareholder on a unit or will the application include all names of all producers in the crop(s) on
the unit?
26. Prevented planting (corn) is followed by planting a second different crop (canola) that fails. Is the payment earned on both
crops? 27. If a producer requests payment on a crop on only one unit, does
production from all units the producer has an interest in have to be reviewed? |
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