Bill Huffman
Director - Government Relations

The Friday Report

April 3, 2009

Congress focused its efforts this week on the budget for FY 2010. Voting along party lines, the House and Senate both approved budget blueprints that will endorse spending in the $3.5 trillion dollar range for the next fiscal year beginning October 1st. The measure now moves to a conference committee where negotiators must resolve differences between the two chambers. While Democrats generally back President Obama’s initiatives for changing vast sectors of the economy, they appear to be fiercely divided over the details. The budget plan is simply a budget plan. The details now have to be worked out over the next several months and then the various appropriations bills have to be developed to pay for all of the Obama initiatives. There will be contentious fights over spending and priorities.

As the Washington Post reported today, there is no agreement among Democrats (and Republicans) on how to pay for an overhaul of the health-care system expected to add more than $1 trillion to the budget over the next decade. Congress will also be wrestling with how to spend the hundreds of billions of dollars the government stands to collect by settling limits on greenhouse gas emissions and forcing industry to buy permits to pollute.

The whole idea of a “cap and trade” program for greenhouse gas emissions and carbon sequestration is new and there will be much debate as the Administration and the Congress moves forward.

Both the Senate and the House adopted President Obama’s plan to extend tax cuts for the middle class beyond their 2010 expiration date and to allow cuts for families making more than $250,000 a year to expire. Both chambers scaled back Obama’s plan to protect millions of families from the alternative minimum tax and dropped his proposal to make permanent his signature $800 tax credit for working families.

One encouraging note, however, is that Congress has at least developed a budget blueprint earlier this year than in recent years even though it was largely driven by the Democratic majorities in both houses of Congress.

Cuba Developments

A major effort is underway in Congress to loosen restrictions on travel and trade with Cuba.

Kansas Republican Congressman Jerry Moran has introduced with 17 co-sponsors the Agricultural Export Facilitation Act of 2009, a bill that would facilitate U.S. Cuba agricultural trade. The bill would clarify that a seller of a product receives payment at the time a Cuban purchaser takes possession of that product.  Congressman Moran, who will be in California April 14th for a “California Rice Industry Dinner” in his honor, said “With the current economy placing new hardships on our producers, this is an opportune time to encourage the U.S. to change its trade policies toward Cuba”. During the Bush Administration, the U.S. Treasury Department required “cash in advance” for payment for agricultural products bound for Cuba, making it more difficult for American farmers to sell products there.

Cuba, of course, is a customer of the southern U.S. rice industry, which stands to gain immensely if this legislation is approved and signed into law.

In a related development, Congressmen Bill Delahunt, D-Maryland and Jeff Flake, R-Arizona, co-chairs of the bipartisan House Cuba Working Group, are working on legislation to end the ban on U.S. travel to Cuba.  Senators Byron Dorgan, D-North Dakota and Mike Enzi, R-Wyoming are both working on similar legislation in the U.S. Senate.

USDA Announces Farm Payment Program Deadline Extension

USDA Secretary Tom Vilsack this week announced the deadline for sign-up for the Direct and Counter Cyclical Program will be extended from June 1 to August 14, 2009.  This is the result of lobbying by several commodity groups including the USA Rice Federation, asking for more time for growers to sign up because of the new rules for program eligibility and participation.

NASS Issues New Stocks Report and Planting Intensions Estimate

The National Agricultural Statistics Service (NASS) released its latest Stocks Report this week, which shows rough rice stocks are 13 percent less than March of 2008. Rough rice stocks in all positions on March 1 totaled 91.9 million hundredweight.  Long grain varieties accounted for 70 percent, medium-grain accounted for just 27 percent with short-grain at 3 percent.

NASS also released the agency’s March 1 Planting Intentions Report. The report estimates total U.S. rice plantings at 2,526,000 acres, up about 160,000 acres from last year. All of the increased acreage is in the south.

For California, the reports projects 2009 plantings at 470,000 acres, down 8 percent from a year ago.  We should remember that this data was collected in early February through grower surveys well before the water situation in California improved because of the March storms. The report did note that plantings of medium grain in Arkansas were projected to be up 60,000 acres over a year ago and about 5,000 acres more for medium grain in Louisiana.

Trade Developments

While it is too early to evaluate the Obama Administration’s effort on enforcing trade agreements, it was encouraging this week that the U.S. Trade Representative’s office Tuesday urged Japan to fulfill its “minimum access” rice-import obligation under the World Trade Organization rules.

In a report from The Japan Times newspaper, it was noted that the Obama Administration’s trade report said “Japan failed to meet the WTO rice-import quota in fiscal 2007, which ended last month, due to higher-than-normal global rice prices”. 

Japan was supposed to import 770,000 metric tons of rice for the year but the amount purchased was about 70,000 tons short of that level according to the Japan Times article.

For California, we remain hopeful the Obama Administration will help get Taiwan back on track purchasing the rice they agreed to purchase under their trade agreement with the U.S. Taiwan has not purchased California rice for about 18 months and is about 170,000 metric tons in arrears in the quantity of rice they agreed to purchase.

Trade agreements and their enforcement are critical to the continued economic success of the U.S. rice industry.