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News from the Minnesota Association of Wheat |
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GLICKMAN LEADS CHINA DELEGATION
GLICKMAN ADDRESSES CONFERENCE
SUGAR REFINERS WANT NO SUGAR PURCHASES
CORN GROWERS WORRY ABOUT SUGAR PURCHASES April 21, 2000 The National Corn Growers Association is concerned about USDA's possible plant to purchase sugar and divert it to ethanol production. That will displace corn
and have a negative effect on corn prices and carryover stocks, says NCGA. To avoid potential sugar loan forfeitures later this year, USDA is considering purchasing 300,000 tons of sugar and selling it to ethanol
producers for a fraction of the cost to taxpayers, says NCGA. The 300,000 tons of sugar could produce 45-50 million gallons of ethanol. "If there is not additional demand for this ethanol, approximately 18-20
million bushels of corn will be displaced and added to carryover stocks, lowering corn prices by about one cent per bushel and reducing corn cash receipts by $100 million," NCGA adds. In a letter to Agriculture
Secretary Dan Glickman, NCGA President Lynn Jensen said, "We strongly urge you to refrain from enacting this disposal plan unless some provisions for definite market growth can be demonstrated and displacement of
corn can be prevented." NCGA wants USDA to create additional ethanol demand by denying California's request for a waiver from the Clean Air Act's oxygenate requirement for reformulated gasoline, and
move aggressively to open markets for corn sweetener exports to Mexico.
RUSSIAN EXPECTED TO IMPORT 300 TMT WHEAT SOON
U.S., CANADIAN ECONOMISTS: RESEARCH TEAM SHOULD INVESTIGATE TRADE DISPUTES The director of
the Northern Plains Trade Research Center at North Dakota State University and a senior economist with the Canadian International Trade Tribunal in Ottawa, Ontario, are recommending that a joint Canada-U.S. research
team be formed to deal objectively with the trade disputes that have developed as a result of the Canada-U.S. Free Trade Agreement (CUSTA) and later, the North American Free Trade Agreement (NAFTA). "Mainly, the
U.S. International Trade Commission deals with these issues, so it should form this research team to improve the understanding of trade issues between the two countries related to agricultural goods," says Won Koo,
a professor of agricultural economics at NDSU. Koo and Canadian economist Ihn H. Uhm make this proposal in a recently released economic report titled "U.S.-Canada Border Disputes in Grains: Dynamic Interface
Between the Free Trade Agreement and Trade Remedy Laws." The Canada-U.S. Joint Commission on Grain was formed to deal with trade disputes, but Koo says the commission is unlikely to find impartial solutions to
the trade disagreements that are currently embroiling U.S. and Canadian producers--wheat and barley farmers in particular. Koo says, "We are proposing the establishment of a team, or a committee, which will do
some objective research. There are complaints from the Canadian side and complaints from the U.S. side, so this committee would need to investigate to see whether the complaints are valid." When it became
effective in 1989, CUSTA created one of the largest single markets in the world, and the overall effects of the agreement have generally benefitted both the United States and Canada. Koo says the level of trade between
the two countries is now nearly 2.5 times greater than before implementation of CUSTA. But CUSTA has also resulted in significant increases of wheat and barley imports from Canada. U.S. imports of Canadian western
red spring wheat increased from 8 million bushels in 1990 to 65.7 million bushels in 1993 and then decreased to 56.7 million bushels in 1997. Meanwhile, trade in durum wheat followed a similar pattern. During the same
period, U.S. barley imports from Canada grew from 9.9 million bushels in 1990 to about 829.2 million bushels in 1994 and then decreased to 45.4 million bushels in 1997. NDSU agricultural economists estimate that for the
1994-1996 period, the average farm income loss for U.S. producers may have ranged from $31 million to $64 million for durum wheat and $73 million to $128 million for barley. That situation has caused commodity groups
and producers from the Dakotas, Montana and western Minnesota, in particular, to claim that the Canadian Wheat Board (CWB), the sole international marketer of Canadian barley and wheat, engages in practices that distort
trade. For example, U.S. producers contend that the CWB practices price discrimination--meaning it prices barley and wheat differently depending on the customer--and that this pricing practice gives the CWB an unfair
advantage over private U.S. grain-trading firms, Koo says. However, the World Trade Organization (WTO) allows a state trading agency such as the CWB to charge different prices between markets as long as it is done for
commercial reasons related to market conditions in export markets. "Another complaint U.S. farmers have is that the CWB does not provide sufficient information regarding its general operation," Koo says.
"This is especially true regarding price information for agricultural commodities. I have argued that these practices give the CWB an unfair advantage over its U.S. competitors." During the mid-1990s and
beyond, the U.S. Trade Representative, acting on behalf of the Clinton Administration, and Canadian negotiators reached a number of settlements regarding grain trade between the two countries. One came to be known as
the Wheat Peace Agreement, negotiated during the 1994-95 crop year. Another was the Record of Understanding, reached in late-1998. "The primary purpose of the Record of Understanding was to ease the tension
between the United States and Canada resulting from the trade in grain and livestock," Koo says. "But the root of the problem remains unaddressed as far as grain producers in the United States are
concerned." Koo and Uhm identify three factors that continue to influence the bilateral trade between the United States and Canada: one, the persistent differences in grain marketing and delivery systems; two,
the presence of exportable commodities in Canada, given its grain-production capability and its inability to utilize all it produces; and three, the relative value of the Canadian dollar. Some economists argue that
gradual harmonization of trade policies, farm subsidy programs and marketing institutions may reduce U.S.-Canada trade disputes involving cereal grains. However, others remain skeptical, Koo says, and they base their
view on the fact that the elimination of Canada's Western Grain Transportation Act (WGTA) did help to harmonize the countries' grain freight-rate structures to some extent, but this action did not lead to a significant
reduction in Canadian exports of wheat and barley to the United States. "On the contrary, the elimination of the century-long freight-rate subsidy in Canada only encouraged Canadian grain producers to divert
grain shipments from the world market to the United States," Koo concludes. "However, harmonization of trade policies, farm subsidies and marketing practices could reduce trade disputes between the two
countries. "The research team we are proposing should investigate what is causing the volume of cross-border trade in the context of world market perspectives, and do so in an impartial manner. Finding workable,
realistic and long-term solutions to this problem is mutually beneficial."
CANADIAN PLANTING EXPECTATIONS
WHEAT FOODS COUNCIL STATEMENT ON THE WHEAT BRAN POPYP PREVENTION TRIAL STUDY The Wheat Foods
Council would like to offer some balanced perspectives on the issue: "This study required participants to remain on a high- or low-fiber diet for three years. However, the number of subjects in the high-fiber
group adequately adhering to the diet was much lower during years two and three. It's difficult to determine if wheat bran fiber can be protective if it's not consumed," said Judi Adams, M.S., R.D., president of
the Wheat Foods Council. "If anything, this study illustrates that people should consume more fiber and whole grains to prevent the first occurrence of colorectal polyps. It's just like brushing your
teeth to prevent the onset of cavities once you have a cavity, all the brushing in the world isn't going tomake it go away." Many health experts, including the study's lead investigators, emphasize Americans
should continue to eat a diet rich in complex carbohydrates and whole grains, because fiber-rich foods protect against developing colon polyps in the first place, as well as coronary heart disease, hypertension, certain
types of diabetes, and other types of cancer. In addition, Dr. Arthur Schatzkin, chief of the National Cancer Institute's Nutrition Epidemiology Branch, and lead investigator of a similar study in the April 20
issue of the New England Journal of Medicine, said "Adopting a diet low in animal fat, high in whole grains, and rich in vegetables and fruit can improve one's overall health and reduce the risk of chronic
disease." James W. Anderson, M.D., professor of medicine and clinical nutrition at the University of Kentucky, points out the many health benefits of whole grain foods and wheat bran. "Both whole grains and
wheat bran are excellent sources of fiber and phytochemicals in the diet. The evidence is mounting that whole grain foods have important protective effects for heart disease and diabetes. It's also possible
that studying people with colon polyps may not be the best way to assess risk for developing colon cancer." The revised Dietary Guidelines for Americans, anticipated to be released by the USDA/HHS (United States
Department of Agriculture/Department of Health and Human Services) at the end of May, will continue to emphasize at least six daily servings of grain foods as the base of a healthy diet with several of these
servings from whole grain foods. For more details or additional information, please contact Sherry Frey at 816/474-9407, ext. 376. The Wheat Foods Council is a nonprofit organization formed in 1972 to help increase
public awareness of grains, complex carbohydrates, and fiber as essential components of a healthful diet.
ARS RESEARCH ELEVATES GRAIN STORAGE PRACTICES Agricultural Research Service researchers in
Manhattan, Kan. and state researchers have gathered scientific data that grain elevator managers can use to thwart damage caused in stored wheat by the lesser grain borer, rice weevil, red flour beetle, and rusty grain
beetle. See the April issue of Agricultural Research magazine for a complete report at: PRODUCERS URGED TO KILL VOLUNTEER CEREALS, ROTATE TO MINIMIZE DISEASE POTENTIAL "Producers should scout their fields and destroy any green-growing volunteers. By taking out these volunteers,
we eliminate this reservoir of inoculum, and it is less likely to infect this year's crop," says Roger Ashley, area extension specialist at the NDSU Dickinson Research Extension Center. Ashley says the problem
of overwintering volunteers is not widespread, but on fields where the volunteers are present, producers should select between a tillage operation or a preplant herbicide (burn-down) application to destroy the plants.
Herbicides containing glyphosate as the active ingredient, such as Touchdown or any of the Roundup formulations, are effective, as is Gramoxone Extra, whose active ingredient is paraquat. After either a tillage
operation or a herbicide application, producers should wait from 10 to 14 days before seeding. Ashley says, "By allowing this green bridge to remain in place, we're almost guaranteeing ourselves that we'll see
these viral diseases this year." In addition, volunteer cereals are good hosts for fungal root diseases, particularly root rot, Ashley says. If possible, producers should plant alternative crops such as peas,
lentils, flax, sunflower or safflower on last year's small grain fields that had overwintering volunteers. Producers who plan to re-crop their small grain fields to hard red spring wheat, durum or barley should
consider using a seed treatment, but Ashley warns that seed treatments are not as effective as well-planned rotations for controlling root rots.
NDSU AG ECONOMIST: THE IRRATIONAL IS RATIONAL So why are U.S. producers intending to plant as many acres to crop this year as they did last year? An
agricultural economist at North Dakota State University says there is rational thinking behind this seemingly irrational behavior. "It can be argued that producers respond to higher prices by producing more, and
they respond to lower prices by also producing more," says Dwight Aakre, extension farm management specialist at NDSU. "The attempt to increase production when prices rise is rational because producers are
attempting to maximize their profits. But it is also rational to increase production when prices fall because production agriculture is characterized by high fixed costs, which are those costs that do not change in the
short run with changes in output." A case in point: the NDSU Extension Service projected budgets for spring wheat in south central North Dakota show the total cost of production (excluding labor and management)
to be $107.79 per acre. Of that total, $51.83 (48 percent) is variable, leaving $55.96, or 52 percent, as fixed costs. Labor and management are also fixed costs, Aakre explains. Under the same set of budgets (again,
excluding labor and management), the total cost of production per bushel is $3.59, based on an expected wheat yield of 30 bushels per acre. With a projected price of $3.22, the return to labor and management is a
negative $11.19 per acre, or a loss of 37 cents per bushel. "But as long as the price is above the variable cost of $1.73 per bushel," Aakre says, "producers are better off producing because anything
above $1.73 is available to help pay fixed costs. This explains why even in times of low prices there continues to be pressure to expand." In the situation where a wheat producer in south central North Dakota is
considering expanding by renting additional land, the land rent should be included in the variable costs rather than in the fixed costs, Aakre says. But even then, the price needed to cover variable costs is only $2.75
per bushel, which is well within the budgets' projected price. "Expansion is a strategy to deal with low prices," Aakre says. "We continue to see strength in the land rental market in most of North
Dakota. Demand for land in an era of low returns in agriculture is an attempt to spread the fixed costs of machinery and operator and family labor over more acres because each acre is contributing less. This same
scenario holds true with livestock enterprises. That is why we are seeing an increase in large livestock operations and the gradual disappearance of small operations." In contrast to this expansionist strategy,
many agribusinesses routinely engage in supply management when prices decline. Aakre cites recent examples involving Illinois-based firms: Archer Daniels Midland closed three domestic oilseed crushing plants and reduced
production at all its other plants, and Deere & Company has reduced its agricultural manufacturing operations on a worldwide scale. "What these agricultural giants are doing is managing supply to meet demand
and thereby preventing burdensome supplies that must be disposed of at unprofitable prices," Aakre says. "But when it comes to production agriculture, no single producer can influence price, and so producers
may not cut back on production until price drops below variable costs or they are able to shift to a more profitable alternative crop. This distinction makes it difficult for this sector to reduce supply without
government assistance." And there are other factors affecting the production agriculture sector that do not influence other industries in similar ways, Aakre says. One is weather, which despite agronomic
advances remains the biggest factor in determining the supply of major crops on a global scale. Another factor is inelastic demand for agricultural commodities, which means that a small change in supply results in a
much larger change in price in the opposite direction. "The biggest challenge producers face today is to perform a thorough analysis of the current production and financial characteristics of their farm
business," Aakre concludes. "This needs to include an analysis of their present situation as well an objective analysis of where their business is heading. It is difficult to address these situations except
through a one-on-one consultation with someone well-versed in management strategies."
USDA LAUNCHES ON-LINE
DIRECTORY OF U.S. FOOD AND AGRICULTURAL EXPORTERS
"Increasing exports is vital to the health of U.S. agriculture, but buyers frequently have trouble finding U.S. suppliers of the products they need," Glickman said. "This directory provides
information to help importers find the products they want and promote them effectively to their customers." USDA's agricultural attaches, trade officers, and Washington-based staff will promote the list to
overseas buyers and importers. The system also permits on-line registration and maintenance by suppliers, making it easy to keep their product and company information updated. The U.S. supplier list will be
especially helpful to small- to medium- sized firms that otherwise might not get the exposure they need to benefit from export markets. Around 2,800 exporters participated in the paper version of the program in
1999, and over 4,000 are expected to participate in 2000. Potential buyers can access the on-line directory of U.S. suppliers by logging onto the Foreign Agricultural Service Web site at U.S. food, fish, fiber, and forest product suppliers can register their companies and products for inclusion in the on-line directory at |
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