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Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

By Bruce Hamnes, Stephen, MN, Chairman, Minnesota Wheat Research and Promotion Council

I am disturbed by a speech to a committee of the European Parliament by Renato Ruggiero, Director-General of the World Trade Organization, "The New Multilateral Trade Negotiations, the European Union, and its Developing Country Partners: An Agenda for Action," in Brussels, Belgium on February 18.

You can find Ruggiero’s speech in its entirety on the following web site: http://www.wto.org/wto/speeches/brussels.htm. He made some good points. But I respectfully disagree with Ruggiero’s second point in observations concerning the next round of WTO multinational trade talks:

"Agriculture cannot again be allowed to become the predominant issue of the new Round. And we cannot give the impression that success or failure depends only on the possibility of agreement among the major trading partners on agricultural issues. By focusing too much on traditional issues, we risk overlooking how much the world economy has changed since the Uruguay Round, and how important the new issues have become to developing and developed countries alike. I would like to point out that in a new Round we will have to put more emphasis on the factors that will dominate economic development and the global economy in the twenty-first century — especially new technologies and services."

Ruggiero — whose term as Director-General ends on April 30, 1999, at which time a new D-G will take over — is correct in that new technologies and services are indeed important trade discussion areas. But I would argue that global food supply, security, and trade is still paramount to developed and developing nations, and there are critical agricultural issues that need to be resolved in the WTO, including export subsidies, market access, the effect of State Trading Enterprises, and pseudo trade barriers.

These trade issues are complex. Trade policy can be technical and less-than-exciting. But we must be engaged in it, since it clearly affects our livelihood as agricultural producers in the U.S.

Calculations by Dr. Bruce Gardner, former USDA assistant secretary for economics and now economics professor at the University of Maryland, clearly show just how important trade is to us: Every 100-million bushel gain or loss in U.S. wheat exports has a 60-cent effect on the U.S. wheat price, according to Gardner’s calculations, based on USDA information and current year market statistics. Further, he says that over the long run, every million tons of wheat exported mean about five cents to the per-bushel price of wheat in the U.S., taking into account producers’ supply response to increased demand for wheat.

There are no easy answers to solving our trade problems. Not only do we have problems in agriculture to address, but as Mr. Ruggiero points out, other trade areas that will be vying for attention as well. That’s why it’s important for wheat producers to have representation on trade matters.

Your representation— wheat producers who serve on wheat councils and commissions supported by the wheat checkoff in 19 states— met in Washington D.C. in a spring board meeting of U.S. Wheat Associates, to strategize for the next round of WTO talks, which begin November in Seattle. We certainly don’t know what the outcome of these talks will be yet. But it will be important to be there, objectives in hand. And U.S. wheat producers will be well represented.

Needed: An aggressive agricultural export agenda

By Alan Lee, Berthold, ND Chairman, North Dakota Wheat Commission

The North Dakota Wheat Commission is deeply concerned about circumstances that led to a plunge in wheat prices recently. USDA’s February supply and demand report included a 75 million-bushel cut in the 1998-99 U.S. wheat export estimate, coupled with a 5 million-bushel bump in imports. Projected year-end inventory climbed to a huge 981 million bushels.

This near 200-million-bushel hike in stocks since November has prices reeling. Since late 1998, export projections have consistently been reduced in monthly USDA supply and demand analyses and local prices have dropped to $2.75 per bushel, very near loan levels. U.S. wheat stocks have more than doubled in just two years, and are now nearing the billion-bushel mark.

Just three years ago, the stocks level compared at 377 million bushels and the average U.S. wheat price was $4.55 per bushel. This nearly unprecedented inventory growth need not have occurred. What this country needs is an aggressive position on U.S. agricultural trade, with particular emphasis on wheat.

The "cornerstone" of the Administration’s current export policy, the wheat donation program, has been plagued by recurring delays and has not served U.S. wheat producers well as an export tool.

Most U.S. producers welcome the production flexibility of the current farm program, but feel they have been duped on the promise of export opportunities contingent to the program’s success. Farmers recognize that only half the amount of wheat produced in the efficient U.S. system can be consumed in this country and, consequently, have willingly invested their own dollars as a match to the government’s Foreign Market Development (FMD) program.

Despite many individual market development successes, the United States’ share of the world wheat market currently hovers around 28%, compared to an average 34 % from 1993 to 1995 — the last three years the Export Enhancement Program (EEP) was operational. Outside of additional export credit guarantees for some of the most critically strapped Asian nations, we’ve seen no attempt to shore up demand with more aggressive tools that are available to do just that. As a result, the United States is carrying an inordinate share of the world’s wheat inventory, while other exporting nations have built market share and minimized their own exposure to holding the world’s stocks.

Secretary of Agriculture Dan Glickman’s recent comments at the National Association of Wheat Growers convention and the USDA Agricultural Outlook Forum indicated no urgency in restarting EEP or a similar program to expand exports. EEP has proved itself effective in moving inventory while providing a strong disincentive to other countries to expand their own production. The program also raised U.S. farm-gate prices versus those of our competitors, a fact that did not go unnoticed by Canadian farmers.

Some USDA officials have stated that EEP and other programs designed to expand exports and free the country of excessive supplies will not happen until "market conditions warrant" such measures. The present stocks and price situation indeed warrants immediate action in the export arena. We cannot afford temporary measures to reduce production that will result in a permanent give-away of additional market share.

The European Union (EU) recently raised its export restitution to $1.10 per bushel, the highest level since September. The EU also has implemented a domestic program that will increase its wheat acreage this year. At the same time, the wheat exporting STEs - better known as the Canadian and Australian Wheat boards — use their own brand of export subsidization through administered pricing and quality delivery schemes. None of these players has suffered an amassing of stocks like U.S. producers.

World wheat situation statistics strongly suggest that U.S. exports have suffered losses at the hands of our competitors. Losses in market share are difficult to regain. Therefore we strongly request that Secretary Glickman pull out all the stops and implement every tool available to improve the competitiveness of U.S. wheat in the world market. Adopting an aggressive and fully funded export stance would have multiple benefits for U.S. producers and taxpayers. Producer pricing opportunities and incomes would improve and perhaps government payments would decline if sufficient market opportunity were provided.

As the only non-subsidizer in the export market, the United States currently lacks any leverage to convince our competitors to reduce their export subsidies or eliminate their trade distorting practices. An aggressive U.S. export agenda that incorporates EEP, GSM 102/103 export credit programs, the end of export sanctions, and the harmonization of international phytosanitary measures, would also provide some much needed leverage in the upcoming round of World Trade Organization (WTO) negotiations.