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News from the Minnesota Association of Wheat |
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NAWG URGES FARM SAFETY NET FIX TRIGGERED BY PRICE
February 25, 2000 NEWS RELEASE Proposal among group's farm policy resolutions for 2000Federal lawmakers should shore up safety-net holes in the Federal Agricultural Improvement and Reform (FAIR) Act by including a
counter-cyclical support payment that would be triggered by low prices. That's the recommendation by the National Association of Wheat Growers, which recently approved its farm policy resolutions for 2000. Several
counter-cyclical payment ideas are floating on Capitol Hill. The structure of the current farm bill would remain intact under such plans, but include a counter-cyclical payment that would kick in through a trigger
mechanism that would be based on variables such as net farm income, gross revenue, U.S. farm exports, or the U.S. grain stocks-to-use ratio. Under the NAWG's counter-cyclical plan, payment would be triggered whenever
the national average price received by producers falls below a trigger price. The trigger price would be established by subtracting the current year's payment under the existing farm bill from a base price (NAWG is
considering $4.30 as a starting point for discussion). The counter-cyclical payment would be equal to the difference between the trigger price and the higher of the loan rate or the average price received.
An example of how the NAWG's counter-cyclical plan might work: $4.30 trigger price Current law would not be altered by this proposal except for the additional triggered payment. Yearly payments under the current farm bill would remain in place, the marketing loan would
remain the same, and loan deficiency payments would continue. The additional counter-cyclical payment might be limited to each production entity by a separate payment limitation. "In essence, this concept would
guarantee producers no less than $4.30 per bushel on their contract bushels. A key difference in the NAWG's counter-cyclical payment plan as opposed to others is that it is not tied to production, only price," says
Allan Skogen, president of the North Dakota Grain Growers Association and a Valley City, N.D. producer. "We think it's important for the counter-cyclical payment to be based on price, because ultimately, that's the
bottom line." Implementing a counter-cyclical payment plan will provide the safety net support lacking in the current farm bill, NAWG leaders say, and spare Congress from making annual emergency ag relief
packages. Further, it may also simplify crop insurance reform efforts. The NAWG points out it may ease pressure to attach a price or revenue component to crop insurance, thus allowing policy makers to focus more on
fixing disaster coverage holes in the current crop insurance program by improving actual production history (APH) and implementing higher, more affordable coverage levels. The NAWG intends to have its
counter-cyclical plan evaluated by the Food and Agriculture Policy Research Institute, which analyzes farm policy trends and policy proposals. However, if the farm bill fix can't be attained in this
campaign-shortened election year, the NAWG recommends that Congress approve a market loss assistance package similar to last year. Efforts to fix the current farm bill may fall short this year, due to an abridged
legislative calendar because of election year campaigning—there are 132 working days in Congress this year versus the usual 211 days. That may limit farm policy legislation this year to crop insurance reform and more ad
hoc assistance to offset the likelihood of poor commodity prices. The NAWG urges that if Congress does approve a third ad hoc assistance package this year, that the market loss payment, when combined with this year's
farm bill payment (58.8 cents for wheat) be at least equal in size to the combined farm bill and market loss payments in 1999. Ron Anderson, president of the Minnesota Association of Wheat Growers and a Hallock,
Minn., producer, says matching last year's combined payment rate is going to be important, since this year's scheduled "Freedom To Farm" payment is less than last year. The payment was 63.7 cents in 1999.
"Producers are also contending with higher fuel costs and higher interest rates on farm operating loans compared to last year, all the while facing the same dismal price outlook for the third straight year,"
he points out. A combined $80,000 payment limit should apply to producers who would receive market loss payments on top of "Freedom To Farm" payments this year, the NAWG recommends. The NAWG strongly opposes
a $30,000 combined payment limitation proposed by the Clinton administration in its $11 billion, two-year safety net proposal. Speaking at the NAWG's recent annual meeting, U.S. Agriculture Secretary Dan Glickman
stressed that the Administration's safety net package, including the $30,000 combined payment limitation, is a "starting point" for debate, and that the proposed payment limitation will be open to compromise.
Other farm policy resolutions recommended by the NAWG in 2000 and supported by the NDGGA and the MAWG will soon be posted on the NAWG's web site: Contacts: Ron Anderson, MAWG President, ph. 218-843-3367
CHINA IS TOP PRIORITY FOR US FARMERS, SAYS GLICKMAN CHINA BUYS U.S. WHEAT
Release Date: February 28, 2000 Taking a major step towards implementation of an agricultural agreement with the United States, the People's Republic of China has purchased 50,000 metric tons of U.S. wheat, it was
announced today. The purchase is significant in that it is a reliable indication that the Chinese are establishing a sound basis for future trade in agricultural products. The purchase, which would be China's first
significant shipment of wheat originating from the Pacific Northwest in over two decades, was made by China's National Cereals, Oils and Foodstuffs Corporation (COFCO), the official government buyer. It is a
"trial shipment," the first under a phytosanitary agreement reached last April, ending a trade dispute lasting more than 25 years, and it will provide Chinese millers the opportunity to judge the
characteristics and qualities of three classes of U.S wheat. The purchase is for 30,000 tons of soft white wheat, 10,000 tons of hard red spring wheat and 10,000 tons of hard red winter wheat. "The sale of wheat
to China from the Pacific Northwest is a significant breakthrough for the U.S. wheat industry," declared Alan Tracy, president of U.S. Wheat Associates, the industry's export market development organization,
"and we hope it is just the beginning of a new relationship with this potentially multi-million ton wheat market." U.S. Wheat Associates has maintained an office in Beijing for the last 20 years and works
actively to develop the export market there. China is the world's largest producer and consumer of wheat, and as recently as five years ago was also the world's largest wheat importer. The country's imports have
declined significantly during the last few years but many in the trade expect China's wheat imports to pick up again in the next year or two. China has agreed to permit larger imports of wheat and other
agricultural products when they join the World Trade Organization. Resolution of the phytosanitary issues is an important step toward increased U.S. sales, but U.S. market share now depends, to a large extent, on
whether Congress approves permanent Normal Trade Relations status for China. Tracy pointed out that shipping wheat to China from the Pacific Northwest provides a freight advantage for some classes of wheat. "Now
that the China market is accepting wheat from the PNW as well as from the gulf ports, we are in a much better position to compete," Tracy explained. "Now, more than ever, the passage of permanent Normal Trade
Relations status is critical for the U.S. wheat industry." U.S. Wheat Associates is hosting the COFCO trade mission, which arrived in Portland on February 20 and traveled to Montana and Colorado to meet with
farmers and wheat industry officials. They will arrive in Washington DC tonight and will meet with legislative and administrative officials tomorrow. Dawn Forsythe
FARMERS FACE STEEP FUEL PRICES IN 2000 Reuters reported. Crude oil prices have skyrocketed to 10-year highs of $30 a barrel due to tight OPEC controls on
production. Iowa Senator Chuck Grassley asked the White House to reconsider foreign aid plans to OPEC nations and to take a tougher stand with OPEC allies like Saudi Arabia.
RURAL RESPONSE/RISKMANAGEMENT: CROP INSURANCE IS PART OF A GOOD RISK MANAGEMENT PLAN Buying crop insurance gets more confusing every year due to the many
alternatives available, Thiesse says. One set of crop insurance alternatives only provides protection against reduced crop yields. The most popular of these insurance coverages is the "Multi-Peril Crop
Insurance" (MPCI). In most cases MPCI provides coverage up to 75 percent of guaranteed yields, although there are many options available. "Catastrophic Insurance" (CAT) or "Group Risk Policy"
(GRP) coverages are available at a lower cost, but provide very limited yield loss protection compared to a good MPCI insurance policy. Thiesse says "revenue protection" insurance policies that provide
protection against losses from yield and/or price fluctuations have become more popular in recent years. The most popular of these policies is "Crop Revenue Coverage" (CRC), which converts a yield guarantee
into a dollar-per-acre guarantee by incorporating a base crop price per bushel on the guaranteed yield. The coverage offered by CRC is adjusted during the growing season if the actual harvest crop price is varied
from the original base price in the insurance policy. "Revenue Assurance" (RA) and "Income Protection" (IP) are other insurance alternatives that also incorporate the commodity price. Verifying
crop yields every year and understanding "unit structure" are two key elements to gaining the most from crop insurance coverage, Thiesse says. When a producer has a minimum of four years of verified crop
records, that becomes his "actual production history" (APH) used to determine yield guarantees with most crop insurance policies. Farmers with no verified yields must use a "t-yield," which is a
county average yield that is factored downward. For example, a farm operator with a verified APH of 140 bushels per acre on corn would have a bushel guarantee of 105 bushels per acre with a 75 percent MPCI insurance
policy. That same operator would likely only have about a 60-bushel per acre guarantee with a county t-yield and no years of verified yields. "Unit structure" refers to the division of farm units and fields
for crop insurance coverage. Many times there are advantages for a producer to have small land parcels in case of weather-related crop losses (hail, excess moisture). A "basic unit" is all the land for a
specific crop that is owned or cash rented in a county grouped together for insurance coverage. An "optional unit" structure allows each township section to be considered a separate unit for insurance
coverage. Producers do need to maintain individualized crop yield records on each separate unit. Thiesse says there are many good crop insurance agents throughout Minnesota who are very skilled at helping producers
analyze which insurance options are the best risk management tools. An information sheet titled "Crop Insurance Alternatives and Provisions" is available at county offices of the University of Minnesota
Extension Service. It's also available on the National Risk Management Web Site at
CUBA IMPORTS FRENCH GRAINS
YOU'RE EATING GENETICALLY MODIFIED FOOD
By James Freeman There's no escape. You are consuming mass quantities of genetically modified food. The milk on your Cheerios this morning came from a
genetically modified cow, and the Cheerios them-selves featured genetically modified whole grain goodness. At lunch you'll enjoy french fries from genetically modified potatoes and perhaps a bucket of genetically
modified fried chicken. If you don't have any meetings this afternoon, maybe you'll wash it all down with the finest geneti-cally modified hops, grains and barley, brewed to perfection - or at least to completion if
you're drinking Schaefer. Everything you eat is the result of genetic modification. Finish this article at
VICE PRESIDENT GORE STRADDLES FENCE ON CHINA AGREEMENT. When called upon to clarify his remarks Gore stated that he did in fact believe Congress should approve the agreement this year and
acknowledged that it would expand the Chinese market to American workers, farmers and industry. In a letter to the National Association of Manufacturers the Vice President did make it clear that in future agreements he
"will insist on the authority to enforce workers' rights and environmental protections in those agreements." This was typical of the stance that contributed to the failure of the Seattle Ministerial to end
with a successful draft declaration. Developing countries and least developed countries view linking these issues to trade agreements as blatant attempts at protectionism further compounding the difficulties to future
development. These comments only serve to deter market expansion and liberalization in these countries, an action that only serves to depress the rural economy in America further. |
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