Bill Huffman
Director - Government Relations

The Friday Report

May 8, 2009

The effort to further cut farm program benefits is continuing. President Barack Obama sent his detailed fiscal year 2010 budget to Congress this week. The Obama Administration continues to propose a reduction in the farm safety net, risk management and export market development programs.

The Obama plan calls for a $250,000 cap on program payments, seeks to phase out direct payments over three years to farmers with $500,000 in sales revenue annually and the plan also calls for reducing premium subsidies and underwriting grains for crop insurance among other things. Earlier this year, lawmakers in both the House and the Senate (both Democrats and Republicans) refused to make cuts in the farm-program budget largely because farm programs were cut last year during development of the 2008 Farm Bill.

The White House projects a phase-out of direct payments to farms with $500,000 or more in sales would save $9.7 billion over 10-years. Savings from capping payments at $250,000 is estimated to save $126 million over the same period. The Administration’s budget proposal would pump $20 billion in loans and grants to boost funding for rural development projects, including investments in renewable energy and broadband Internet access. The Administration is also proposing increased funding for nutrition programs.

The Environmental Working Group immediately endorsed the plan saying “We’re encouraged that bluster from agribusiness has not deterred the President from his efforts to find meaningful savings and cut waste and abuse.” Commodity groups including the USA Rice Federation stand united opposing the proposed cuts. Key members of both the House and Senate Agriculture Committees likewise oppose the proposed cuts and appear headed for a show down with the President and those in Congress who want to decimate the recently enacted 2008 Farm Bill.

We expect another big fight over farm program payments in this Congress.

Another Fight Is Brewing

House Agriculture Committee Chairman Collin Peterson said this week that he will not support climate legislation being considered by the House Energy and Commerce Committee chaired by Henry Waxman, D-California. Citing the Renewable Fuels Standard-2 proposed rule released earlier this week by the Environmental Protection Agency, Peterson said the provisions in the proposed rule would cripple the biofuels industry.

Peterson told officials from USDA and EPA at a subcommittee hearing that “You’re going to kill off the biofuels industry before it even gets started. You are in bed with the oil industry”. Chairman Peterson is from Minnesota and is a big advocate of bio-fuels including corn ethanol and ethanol made from “switch grass” and other biomass materials.

In unusually strong language, Peterson said he does not trust those who are advocating the new climate change rules. “I don’t think we can negotiate and it is not worth my effort to work with either the Obama Administration or the people here (in Congress) working on a climate bill.”

The White House immediately issued a response to Peterson saying “There should be no question – the Obama Administration is committed to renewable fuels.” Heather Zichal, deputy assistant to the President for energy and climate change said “EPA plans to have its recommendations and finding reviewed”.

Chairman Peterson’s complaint is that the indirect emissions provisions in the proposed energy law were inserted without knowledge of the Agriculture Committee and that he and others on the committee have been fighting to change it ever since. He said he would not support any kind of climate change bill that allows EPA or any other agency any discretion to implement it or to do any rulemaking of any kind whatsoever.

This debate is going to get interesting!

Drought and Flooding Affect Australian Rice Harvest

Reports out of Australia this week indicate that their harvest is almost over in the traditional growing area of Riverina Murray, with the harvest forecast at just 70,000 tons because of the drought. 

Interestingly, there were plantings in the Northern Rivers region this year (for the first time) and the initial effort appears to be a failure, due to heavy rainfall and flooding during the harvest period. A spokesman for SunRice, the Australian rice cooperative said many growers there will not be harvesting a crop.

Australia has had several years now of severely reduced production because of drought conditions.

Taiwan Rice Tenders

Taiwan has again issued tenders for the purchase of rice. Three tenders due May 13th seek 10,000 metric tons of medium/short grain brown rice, 5,934 metric tons of medium/short grain brown rice and 1,000 metric tons of short grain glutinous rice. A fourth tender is due May 15th for bids for 9,000 metric tons of medium/short grain milled rice.

In previous tenders, all bids have exceeded the Taiwanese “ceiling price”.  It remains to be seen if Taiwan will purchase any rice under their trade agreement requirement in these upcoming tenders.

Cuba Trade

As we’ve mentioned in previous reports, there is a full court press on to open up the Cuban market for trade. Many key members of Congress and most major commodity groups are pushing hard to open Cuba for trade. There was some encouraging news this week when House Ways and Means Committee Chairman Charlie Rangel, D-N.Y., said that the U.S. trade embargo on Cuba “most likely” would be removed during the current session of Congress.

Chairman Rangel made his remarks at a press conference on Capitol Hill. Appearing with him were Congressmen Kevin Brady, R-Texas, Jeff Flake, R-Arizona, Rosa DeLauro, D-Conn, Jerry Moran, R-Kansas and William Delahunt, D- Mass. This bi-partisan group together with others in Congress has been supportive of resuming trade with Cuba after more than 40-years of the U.S. trade embargo.