WHEAT GLUTEN IMPORT QUOTA INSTATED: President Clinton has agreed to impose a three-year quota on imports of foreign wheat gluten, following a recommendation from the U.S. International Trade Commission (ITC). Clinton will also undertake international negotiations regarding the dramatic increase in imports of wheat gluten from the European Union (EU). The action, encouraged by the U.S. Wheat Gluten Industry Council (WGIC), carries with it the option of being extended up to five more years.
During its first year, the quota will restrict wheat gluten imports to 126 million pounds-a decrease of nearly 30% from the current import rate. In each of the two following years, imports will be allowed to increase 6%.
The measure includes separate quotas for the EU and other included countries, due to the disproportionate growth of EU wheat gluten imports. Countries excluded from the quota are Canada, Mexico, Israel and the beneficiary countries of the Caribbean Basin Recovery Act or the Andean Trade Preferences Act.
"I am extremely pleased with the president's decision and the effect it will have on creating a fair competitive environment in the marketplace," said Ladd Seaberg, head of the WGIC and president and CEO of Midwest Grain Products Inc., the nation's largest wheat gluten manufacturer. "The quota will effectively offset lopsided trade advantages provided by the European Union to EU producers by allowing U.S. manufacturers time to rebound with aggressive adjustment plans. As a result, this will benefit U.S. wheat farmers, who supply our raw material, and assure U.S. bakery and pet food producers of the continuation of domestic sources for wheat gluten."
Between 1992 and 1997, imports of wheat gluten from the EU increased from 17.5% of the U.S. market to more than 30% of the market. During the first year of the quota, the EU will be allowed to export up to 54 million pounds of wheat gluten to the U.S. In the first three months of 1998, EU gluten was being shipped to the U.S. at an annualized rate of 100 million pounds.
CYANAMID, MONSANTO ANNOUNCE MERGER: Monsanto Company and American Home Products Corporation (AHP) (which acquired Cyanamid in November of 1994), today announced that AHP will purchase Monsanto. The as-yet-unnamed combined company would have a market capitalization in excess of $96 billion and, through global businesses in pharmaceuticals, agriculture, animal health, consumer health care and nutrition, expected 1998 sales of approximately $23 billion. AHP is a giant, one of the world's largest research-based pharmaceutical and health care products companies, and operating in 145 countries.
Monsanto shareowners will own about one-third of the company, with AHP shareholders owning the rest. Current Monsanto Chairman and CEO Robert Shapiro and AHP Chairman, President and CEO John R. Stafford will co-chair and 'co-CEO' the combined company.
As a result of the merger, the companies expect to achieve between $1.25 billion and $1.5 billion in annual cost savings from "synergies and cost avoidance" within three years from the closing.
MOST CROPS STILL AHEAD OF AVERAGE IN MN AND ND: Above-average temps last week will yield to cooler ones this week, according to the Minnesota Ag Statistics Service. As of Sunday, May 31, spring wheat was 97% emerged and 37% jointed, compared to 51% at this time last year and 68% for the five-year average. Oats and barley were similarly situated, with 35% and 39% jointed, respectively. Corn has emerged on 98% of acreage, compared to the 5-year average of 67%. Soybean emergence jumped to 84%, well ahead of last year's pace of 28% and the 5-year average of 31%. An estimated 55% of alfalfa has been cut around the state, a gain of 39% from last week. The 5-year average for the first cutting of alfalfa didn't reach 55% until June 16.
However, according to Jerry Nordick, MAWG member from Rothsay in west-central MN, corn and barley acres there are being dug up and replanted due to recent heavy rains.
In North Dakota, spring wheat is 90% emerged and 20% jointed, compared to 81% emerged and 11% jointed last week and 62% and 3% for the five-year average. Durum wheat is 80% emerged, with 4% jointing, compared to 47% and 0% last year and 62% and 3% for the five-year average. Canola is 98% planted and 88% emerged, corn is 96% planted and 73% emerged and soybean is 86% planted, 51% emerged. Sugarbeets are 100% emerged, compared to 53% this time last year and 76% for the five-year average.
EU TO OVERHAUL AG PROGRAM BY MID-1999: European Union (EU) ag ministers agreed recently to a statement that commits member states to agree on a plan overhauling the EU Common Agriculture Program (CAP) by the middle of 1999.
The European Commission put forward a plan to reform the CAP in March that would cut the price supports farmers receive for a number of crops. However, member states have widely divergent views on the Commission proposal. Reform of the CAP is crucial if the EU is to begin encompassing central and eastern European countries, whose economies depend on agriculture. The CAP reform is also considered to be a strategic move before the reopening of WTO ag negotiations in 2000.
MONTANA FEED BARLEY SOLD TO CANADA: Low-priced Montana feed barley found its way into Canada last week in a reversal of the usual trend. One thousand tons of U.S. feed barley was trucked to Lethbridge, Alberta, as Canadian domestic feed grain prices were considered too high, according to grain traders.
RECENT EEP USAGE LIKELY WON'T JUMP OVER TO WHEAT: USDA General Sales Manager Chris Goldthwait recently told Pro Farmer that last week's USDA offer of 30,000 metric tons of EEP barley to specified countries is "it for the moment. This is just a single, very specific action."
Asked if statements by USDA Secretary Glickman and others that the Ag Department was looking at "several" options relative to the recent subsidized EU barley shipment to California, Goldthwait said, "The EEP offer announced [last] Wednesday is the only action planned."
Despite USDA's concerns for wheat and wheat flour, Goldthwait commented that he sees no big push within most of the Clinton Administration for an EEP wheat or wheat flour initiative. He added that "current market conditions make a stronger case for something in wheat flour versus wheat. And as Secretary Glickman says, we don't think wheat prices would benefit from a wheat EEP initiative."
ETHANOL TAX BREAK WILL LIVE TO SEE 2007: Congress passed the highway bill conference report last week, including an extension of ethanol's tax benefits to 2007. The legislation, approved by the Senate on a vote of 88 to 5 and the House by 297 to 86, will be signed into law by Clinton.
The tax break was set to expire in 2000. It exempts ethanol-blend gas from 5.4 cents per gallon of the gas tax. The exemption would be reduced to 5.3 cents per gallon in 2001, 5.2 cents in 2003 and 5.1 cents in 2005.
