Quick Update on Key Issues

March 12, 2009 07:00 PM

via a special arrangement with Informa Economics, Inc.

Outlook for farm bill changes, ethanol and more

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Quick update on key issues. The following is an update on some key economic, energy, farm and trade policy issues:

-- Farm bill changes: The Obama/Vilsack proposal to phase out over three years direct payments for farmers with gross sales over $500,000 is going nowhere. No major farm bill changes are likely this year or in 2010. However, with budget deficits over $1 trillion very likely over each of the next three years, agriculture spending cuts will be part of a forthcoming congressional exercise ahead. But that is not likely to occur until early in 2011 -- after the 2010 elections -- and that means for the Fiscal Year 2012 budget.

-- U.S. economy: A growing number of analysts do not see any growth for the U.S. economy until the fourth quarter this year, and perhaps not until 2010. Many see an L-shaped recovery in which the U.S. economy could show tepid growth far longer than most now realize.

-- Ethanol: With big hitters in Washington pressing for an increase in the current 10% maximum blend of corn-based ethanol for non-flex fuel vehicles, the odds are growing that the EPA will eventually announce an increase in the blend level. But sources signal a boost of just a few percentage points initially, with perhaps an increase to the 15% area in 2010 or later.

-- Food safety reform: In the past when there was a food safety incident, lawmakers and administration officials would say the U.S. still had the best food safety system in the world, but what was needed was more inspectors and funding. But now those same officials are saying the food safety system is broken and needs reformed. That means it is just a matter of time when reform legislation is voted on and implemented. Food safety-related hearing are already on tap in Congress and the push is on to ink new legislation yet this calendar year, with others seeing a 2010 likelihood. While some lawmakers want a single food agency, the odds are still under 50% of that occurring for a host of reasons. But single-food-agency proponents have the best opportunity in years to accomplish their goal, so this possibility cannot be ruled out.

-- Mandatory country-of-origin labeling (MCOOL): There is almost MCOOL fatigue in Washington, at least until this summer when lawmakers and the Obama administration see how the meat industry is complying at least with the announced regulations. USDA Secretary Tom Vilsack's "voluntary” requests to the industry will not likely be followed. The U.S. government and food industry lobbyists will be conducting polls to see how the meat industry is complying.

If around 90% of beef and pork products impacted by MCOOL are in Category A (born, raised and slaughtered in the U.S.), then Congress will not push for any other major changes. If the percentage isn't close to 90%, lawmakers, prodded by the Obama administration, will very likely seek changes. Also, the current exemption for processed meat products is an issue that keeps coming up, with USDA's Vilsack already signaling he wants some changes in this area.

-- Trade policy issues:

  • Cuba: Although the Fiscal Year 2009 omnibus spending bill includes language providing flexibility for U.S. farm exports to Cuba, Treasury Secretary Timothy Geithner told some lawmakers that Cuba provisions would have little impact on current law, a pledge that helped ease concerns of two Democratic senators so they would vote for the spending package.
  • Panama FTA: Congressional sources predict the long-pending Free Trade Agreement (FTA) with Panama will be approved this calendar year. But other pending FTAs with Colombia and South Korea await so-called "benchmarks” before the Obama administration will seek legislative approval. That will take time and is more likely a matter for 2010, not this year.
  • Trade agreement enforcement: Ron Kirk, President Obama's nominee to be the new U.S. Trade Representative, told Congress he would focus on enforcement of existing agreements, without detailing what that will entail. If U.S. trading partners view any enforcement action as protectionist, they will not hesitate to retaliate.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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