Wiesemeyer

Slide1: 

What’s Ahead for 2007 Farm Bill: Commodities, Conservation, and Energy Jim Wiesemeyer Informa Economics Feb. 14, 2007

Slide2: 

Economic Issues Economy U.S. GDP - FOMC/Interest rates - Dollar - Int’l economy Ag disaster aid: Pres. Bush wants budget offsets

Value of Farm Real Estate (Jan. 1) and Value per $ of Net Cash Farm Income (P/E): 

Value of Farm Real Estate (Jan. 1) and Value per $ of Net Cash Farm Income (P/E) $/ac. ratio P/E

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Economic Issues Budget projections are key to farm bill funding Deficit PayGo CBO Budget resolution

Slide8: 

Economic Issues Trade Doha - FTAs - TPA Beef trade (Canada, Japan, South Korea) Cuba - China - Rice GMO issue Immigration Compromise may take until 2008

Slide9: 

Energy Issues Oil companies losing some tax benefits Will help pay for alternative fuel programs No omnibus energy bill likely Instead, several separate bills; timing murky President Bush State of Union Address Alternative Fuels Standard - Cellulosic - SPR - CAFE

Slide10: 

Energy Issues Legislation and other energy issues AFS - Cellulosic crops/Farm Bill - Blender Credit - Tariffs Ethanol reserve? Carve out for biodiesel, cellulosic production? Food versus fuel…President Bush speaks out Hoping (praying) for a good corn yield…enough acres Opt-out for CRP without penalty?

Slide11: 

‘07 Net Revenue Prospects Corn Up more than $200 per acre Soybeans Up around $38 per acre All Wheat Up around $32 per acre All Cotton Incentives little changed; loan revenue still in play

Ethanol v. Gasoline: 

Ethanol v. Gasoline Ethanol Growth from ’00 to ’06 = 3.4 bil. gals. Gasoline Growth from ’00 to ’06 = 11.0 bil. gals. SHARE OF ’00 to ’06 GROWTH MET BY ETHANOL = 31%

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2007 Farm Bill Drivers Media & Public Opinion Interest Group Roles Ag Economic Status Political Climate 2006-08 Doha Status / Details Federal Budget 2007 Farm Bill

Slide14: 

Politics and Elections Debate on 2007 Farm Bill ahead of 2008 election 2006 –Liberal Dem leadership must contend with new moderates who may not go along with agenda 2008 – Presidency and both House and Senate up for grabs House - All 435 House Seats Senate - 33 Senate Seats (21 GOP, 12 Dems) White House -- first time since 1928 that… Only once in the past 50 years, in 1988, has a political party won a third consecutive four-year presidential term.

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Farm Bill Issues White House, USDA: Active role Johanns: farm policy: equitable, predictable, & beyond challenge Bush administration farm bill recommendations Bush: veto ahead? Farm and commodity/state groups: differing opinions Wheat, dairy, corn, soybeans, fruits/vegs., livestock Cotton, rice, sugar mostly want status quo More groups want a seat at the table American Farmland Trust - American Heart Assn. - RFA - Oxfam America - American Trucking Assn. Key: Cotton, rice still major factors in farm bill debate But… growing power of other groups, coalitions

Slide16: 

Farm Bill Issues Timing Dems’ goal: end of Sept. 2007, but… Extension of ‘02 Farm Bill? Not likely - new participants want role - Bush proposals Funding level Ag panel leaders to seek more funding above baseline Spending demands Permanent disaster - Energy - Conservation/CSP Dairy - Fruits, Vegs. & Nuts

Slide17: 

Farm Bill Issues Direct payments Will remain Bush plan: 66% higher for cotton; 7% boost, other crops Counter-cyclical payments (CCPs) Admin. wants to change to revenue-based plan Target Prices: Soybean, wheat growers pushing hike Marketing loans/LDPs Bush plan: Lower loan rates; formula/cap; monthly PCPs Generic certificates remain Payment caps Bush plan: AGI means test - $200,000-+ no payments Eliminate three-entity rule Pay cap: $360,000

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Farm Bill Issues 1031… like-kind exchanges Bush plan: eliminate farm program payments on land purchased after date of farm bill enactment via 1031 exchange USDA: ‘This policy change will help mitigate an unintended consequence of the tax code by allowing the market, not the tax code, to drive land purchases and prices.’

Slide19: 

Farm Bill Issues Planting of Fruits and Vegetables on Base Acres Congress will deal with issue; part of Bush plan Bush plan: More funding for specialty crops Permanent disaster program House Ag chairman pushing, but funding an issue

Slide20: 

Conservation Programs Conservation Reserve Program (CRP) Bush plan: current acreage limit; better targeting; biomass program; no general signup in ‘07 or ‘08 Conservation Security Program (CSP) Sen. Harkin wants full funding, but costs could be big Bush plan: $500 million in added funding; no signups in ‘07 or ‘08; expand enrollment from current 15.5 mil. ac. To 96.5 mil. ac. over next 10 years Other Bush plan proposals Consolidate existing programs (EQIP, WHIP, others) under newly designed EQIP $7.8 billion in additional funding for conservation pgms.

Slide21: 

Farm Bill Issues Sugar Ag Committee chairmen favor current program Bush plan: marketing allotment flexibility even if imports exceed 1.532 million short tons Key will be Mexico sugar exports after Jan. 1, 2008 Dairy Policy Milk subsidy program divisive issue among producers MILC expires Aug. 2007; extension cost $2.5-$3.2 bil. Bush plan: continues, but declining scale/34% to 20% Beginning Farmers and Ranchers Bush plan: several innovative reforms

Slide22: 

Farm Bill Issues Energy Issues White House backs $1.6 bil. new funding for renewables, $2.0 bil. in grants/loan guarantees for cellulosic prod. House Ag chairman pushing support program on up to 5 mil. acres of cellulosic crops Livestock Issues Accelerating mandatory cool for meats/products Changes for mandatory livestock price reporting Ban on packer ownership Animal ID - Mandatory vs. voluntary Animal welfare

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Farm Bill Issues Food and Nutrition Food stamp program Linking gov’t purchases of commodities to food pyramid Sen. Durbin pushing Single Food Agency Food safety funding