Former Majority Leaders Push Farm Bill Proposal
**The New York based Conference Board said this week its Consumer Confidence Index rebounded unexpectedly in May. Economists monitor the index closely, since consumer spending accounts for two-thirds of all U.S. economic activity.
**The optimism was supported later in the week, when the Labor Department reported U.S. employers added 157,000 workers to U.S. payrolls in May... nearly twice as many as the previous month.
**The economic data was welcomed in the equity market, where investors pushed both the Dow and the S. & P. 500 well into record territory.
Rural America's fortune, unlike that of Wall Street, is heavily influenced by government farm policy. And this week, former South Dakota Senator Tom Daschle -- a Democrat -- and former Kansas Senator Bob Dole -- a Republican -- laid out a unified agenda for the 2007 Farm Bill.
At the top of the proposal was the elimination of the direct payment program. These funds would be shifted into a permanent disaster assistance fund for farmers. This would be coupled with changes to the counter-cyclical payment program. Combined with marketing loan programs that treat all producers equally, would be a cap on subsidies of $250,000 a year. This includes the abolishment of the loophole allowing farm families to use several names to receive multiple payments on jointly owned property.
The bi-partisan proposal includes the extension of the ethanol tax credit to 2020 and increases the annual fuel production mandate to 60 billion gallons by 2030.
Daschle and Dole's environmental program includes mandatory participation in a carbon sequestration trading exchange and tax incentives for enrolling in a greenhouse gas trading program.
And their conservation measure calls for, among other things, an expansion of the Conservation Reserve Program to 40 million acres and a financial incentive to open their lands through walk-in programs.
Tom Daschle, Bipartisan Policy Center: "Our goal, as is really pretty simple. How can we look at farm policy in a way that would allow farmers to generate the greatest degree of income from the marketplace."p>
Urban Mayors Take the Lead on Fighting Global Warming
The president made the announcement ahead of an upcoming summit of the "Group of Eight" leading industrialized countries, where global warming is expected to be a major topic.
If ratified, the agreement would be the first in which the United States, the world's biggest source of greenhouse gas emissions, commits itself to a specific target for cutting them.
President Bush still refuses to sign the Kyoto Protocol -- a 1999 agreement which set reduction goals for industrialized nations -- primarily because developing nations were exempted from the mandatory cutbacks.
The White House said the president's proposal addresses "life after the Kyoto Protocol expires in 2012." Bush wants to bring China, India and other developing nations, to the negotiation table so they are part of the solution, not the problem.
While critics claim the president is dragging his feet on global warming, dozens of big-city mayors from six continents already are taking action.
Such pollution-fighting plans are coming a bit slower from the nation's capitol. While legislation is inching through Congress, the White House is resisting target dates for greenhouse gas reduction.
Spurred by a recent Supreme Court ruling, the president did sign an executive order asking federal agencies to develop regulations to "cut gasoline consumption and greenhouse gas emissions from motor vehicles" by the end of next year.
But this week, California's Attorney General asked the Environmental Protection Agency to grant a waiver that would allow his state and at least 11 others to act sooner. The states want to enact rules requiring automakers to cut emissions from cars and light trucks by 25 percent and from sports utility vehicles by 18 percent, starting with the 2009 model year.
In addition, California governor Arnold Schwarzenegger said he will sue the EPA if it fails to act by October 25.
There is pressure on the U.S. from the international front as well. However, the Bush Administration reportedly said it would refuse to discuss an agreement to the Kyoto Protocol – which sets carbon reduction goals for industrialized nations – when it meets with the treaty's signatories later this year. Bush has expressed concerns that U.S. compliance with the Kyoto Protocol would increase energy prices and cost millions of U.S. jobs.
Black Farmers Still Looking for Justice
Shortly after the war ended, the government promised "forty acres and a mule" to thousands of newly freed slaves.
But all was not necessarily "equal" in farm country. Although the Civil Rights Act of 1964 made racial discrimination illegal, thousands of black farmers contend they've been systematically denied federal loans and subsidies for decades. In 1999, they won a landmark civil rights settlement with USDA.
To this day though, thousands of black farmers say they've never received a penny of the record $2.3 billion settlement. Andrew Batt examined the case recently and filed this report.
From the post-slavery policy of 40 acres and a mule, to the 21st century fight for minority farm loans…history has not been kind to black farmers.John Boyd, President National Black Farmer Association: “Congress can put law in place to protect the bald eagle, the rockfish, the snail darter, the brown bear, and they won't put laws in place to protect the oldest occupation in history for Black people which is farming.”
For more than a decade, John Boyd has fought toe-to-toe with the U.S. government – specifically the Department of Agriculture.
John Boyd (protesting outside USDA): “How many times is it gonna take for the United States Department of Agriculture to know that we mean business and we're not gonna stop until they get off the dime and settle these cases."
Citing widespread, long-term racial discrimination against black farmers by USDA officials, Boyd and thousands of African-Americans have spent much of the last ten years protesting.
Dan Glickman, Agriculture Secretary: “We are here to announce an historic agreement for both the USDA and, I believe, for our country. It is an agreement that will close a painful chapter in USDA's history and open a more constructive front in our efforts to see this department emerge as the federal civil rights leader in the 21st century.”
USDA settled with black farmers and agreed to pay a record $2.3 billion. But a 2004 independent investigation by the Environmental Working Group discovered an overwhelming number of applicants were denied any legal remedy.
Rep. John Conyers, D-Michigan: "We have 90% of the claims being denied and 65,000 farmers turned away. Now look folks, that isn't justice."
In September 2004, the House Judiciary Committee held hearings to determine why nearly nine out of every ten applicants were denied access to the settlement.
Alexander Pires, Class Counsel, Pigford v. Glickman: “Well you had to find a white farmer that lived nearby and received better treatment than you. I must admit this was the toughest segment to prove.”
As black farmers struggled to obtain financial information about their white neighbors, lead counsel Alexander Pires said there simply weren’t enough lawyers to take care of all applicants.
Alexander Pires, Class Counsel, Pigford v. Glickman: "We studied all of the class action cases and there is no case in the history of this country where an individual person in a class action case has gotten more money."
While some applicants received a flat $50,000 tax-free payment, the vast majority never received a dime from the federal government. An overwhelming number of farmers were dubbed “late filers” by USDA when their applications trickled into office inboxes after a 180-day deadline.
Tens of thousands of black farmers claim they did NOT receive proper notification of the settlement and that an independent USDA monitor failed to judge their applications “on the merits” of their claims.
Government officials say they did more than enough to notify farmers…running ads in over sixty newspapers and airing two-weeks of television commercials and radio announcements.
But when Market to Market caught up with National Black Farmers President John Boyd at his group’s annual conference in Dallas, he blasted that defense.
Boyd: “A lot of these people are not reading those publications. They say hey, can you help me fill this out? They're not gonna come up to you and tell you man, I can't read and write.”
Boyd knows all too well about racial discrimination by local farm loan officers. The native Virginian, who holds a P.H.D in agricultural economics, painfully recalled a USDA investigation reminiscent of the 1960’s civil rights movement – except it took place in the heart of the 1990’s.
Boyd: “…and when they came out to investigate him. They said - Did you throw Mr. Boyd's application in the trashcan Mr. Garnet? Guess what he said. Well, yeah I threw it in the trashcan. They said - Well ah, you only made two farm loans out of one hundred fifty-seven loans in your office. Do you have trouble making loans to Black Farmers? Well, yeah. I think they're lazy and want a paycheck on Friday, but that has nothing with me doing my job. That's just the way I feel personally. He wasn't fired. He wasn't terminated. He was moved to assist a county nearby and he was allowed to retire.”
Market to Market spoke with many black farmers throughout their annual conference and multiple stories echoed Boyd’s claims as farmers were disgusted by what they deemed “blatant discrimination.”
George Roberts: “They looked across the fence and they see the white neighbors over there driving nice tractors, got nice cattle and stuff, making life easier, and they often ask why can't that be us?”
George Roberts was one of the 13,000 successful applicants to the Pigford vs. Glickman settlement. Even though the federal government awarded Roberts $50,000, he says the money pales in comparison to years of high-interest loans that buried him in serious debt. At his Oklahoma farmstead, Roberts said he was too frustrated to keep fighting for other farmers… including his own family.
Roberts: “I’ve told my kids not to get into farming…there’s no money in it. And after what USDA has done over the years…why would ya?”
Market to Market attempted to bring these charges of discrimination to USDA’s top civil rights official – Margo McKay. Mckay responded with a letter stating that “the Pigford case is ongoing” and forwarded any questions to the USDA Office of General Counsel.
After the OGC denied our request for an interview, USDA Press Secretary Keith Williams stated: “Out of fairness to everyone we are not going to do anything to hold this up. Out of fairness we will not go on television.”
Regional USDA officials and farm loan officers at the annual black farmers’ conference also declined interviews with Market to Market. According to Boyd and other farmers, the lack of communication by USDA is not surprising. Some farmers said they stopped listening to USDA promises long ago and any new guarantees - even from Ag Sec. Mike Johanns himself -won’t heal the damage.
Guy Manning Sr.: “It's just like warming up old milk. You warm it so many times that there's no substance in it after a certain period of time. Even if they were telling the truth. There are people, in fact, I voucher to say 95% of the people in the building would not believe him.”Those sentiments aside, help may be on the way for over 80,000 applicants denied access to the Pigford settlement.
Sen. Charles Grassley, R-Iowa: “I had hoped this day would never come. Not because these farmers don’t deserve justice, but because we would have already taken care of justice for every one of them.”
A bipartisan team of lawmakers has proposed legislation that would give black farmers the opportunity to reapply for financial damages. The bill would not guarantee any federal payments…just a chance for an independent monitor to review claims by their merits.
Boyd: “This is not just another day on Capitol Hill. It’s a very historic day because not often do you see bipartisan support from both houses with Republicans and Democrats working together to bring fairness to black farmers.”
Sen. Charles Grassley said he expects lengthy debate on the bill as part of the overall farm bill discussions this year. But the Iowa Republican knows he’s fighting an uphill battle. The plight of black farmers could easily be lost in the clash between competing farm interests.
For men like George Roberts, any chance to fix mistakes made by USDA is a step forward.
George Roberts: “I think it's the best thing to give everyone a chance, and that's all the black man ever wanted was a chance.”
For Market to Market, I’m Andrew Batt.
Market Analysis: Walt Hackney and Doug Jackson
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For the week, July wheat gained nearly 20 cents, while the nearby corn contract gained more than 10 cents.
Heavy fund buying also influenced soybean prices and the nearby contract moved a nickel higher. The July meal contract gained $3.20.
In the fiber market, the December cotton traded in a sideways fashion with the December contract posting a gain of 23 cents.
In livestock, the June live cattle contract was down 25 cents. Nearby feeders were off $1.75. And the June lean hog contract gained 15 cents.
In the financials, Comex gold was up $18.70 per ounce. Nearby crude oil prices lost 12 cents per barrel. The Euro lost 13 basis points against the dollar. And the CRB Index was unchanged at 313-even.
Here now to lend us their insight on these and other trends are two of our long-time market analysts, Walt Hackney and Doug Jackson. Gentlemen, welcome back.
Hackney: Hi, Mark.
Pearson: Gentlemen, welcome back. Well, Doug, let's start with this grain market and obviously this very hot wheat market. This is Chicago soft wheat that's been showing this rally. What's going on over in wheat?
Jackson: We do have, the funds are re-initiating a long position in Chicago wheat but it's driven by a broad array of fears over fundamentals. An ongoing drought in the Ukraine has captured people's imagination, again, not knowing quite how much damage is occurring there. And then later in the week we had stories about unspecified but possibly significant damage to the U.S. winter wheat crop, specifically the hard red crop from persistently heavy rains from Texas to Kansas. And this really has rattled people, they don't know how big the crop should be. Based on the June 1 ratings which are certainly above average our stuff, our work would suggest that the crop should actually be larger. But with the ongoing rain that has thrown that question, you know, open for discussion, a re-evaluation of soft red winter wheat acreage will show up in the June 11 production number coming up here shortly. So, the market has really lost its orientation on just what kind of a crop we've got and we fear that the July 11 world numbers will see a further tightening of an already record tight world supply and demand situation so that has brought in a lot of new fund buying here just as we go into harvest with pressure from harvest activities still a week or two away.
Pearson: Is this a selling opportunity, Doug?
Jackson: Well, here we are at contract highs, Mark, it's difficult to say don't sell at these kind of prices, a lot of people have made sales already. Yeah, we'd sell some wheat at these kind of prices, it's imprudent not to do so. But in the general sense, assuming that we don't have major unknown losses in this world crop, I think wheat follows corn price action which brings us back, of course, to the Corn Belt weather.
Pearson: Alright, let's talk about the corn market. You talked about Corn Belt weather, overall fairly good, a little slow getting the crop in but looks awfully good at this stage, Doug.
Jackson: Well, we caught up on that late planting issue and we largely have eliminated that now, the crop is one of the best rated crops in years, in fact, the best since '94's record situation and this is just short of a classic case now with 12 million more acres that if we have bad weather we go up and if we have good weather we go down. The market is subtly worried about dry weather developing in the eastern Corn Belt coming up out, expanding the southeastern U.S. drought, that has kept the market very nervous this week, found more fund buying. We have rain chances forecasted in the next week and beyond so it's going to be very interesting to see if we can put rain in those dry eastern areas and eliminate the market's fear that we could have an eastern belt centric drought like we did two years ago.
Pearson: Doug, have you altered or updated your outlook in terms of how many acres were actually planted to corn? There's talk maybe we're over 90 million.
Jackson: Well, that's right, Mark, you have a chatter in the industry that we have even more corn acreage planted and that will show up in that June 29th acreage report. It's possible, some fertilizer data and other anecdotal evidence might suggest that which, of course, would even be more incredible than the record 12 million acre switch which is four times anything we've ever done before. So, the market is going to be concerned about that as we work closer towards that report but being month away we've got a world of weather to live through first.
Pearson: Alright, in which case you're not interested in selling corn right now?
Jackson: Well, not really, Mark, but if you talk about a good weather scenario we could have 160 yield or something like that there is down side to the corn market. This is not a down ten, up a dollar and a half item. This is a down a dollar, up a dollar and a half item depending on the weather. So, you've just got to make a determination of what you think the weather is going to be but any kind of a scare you'll see the funds grab for these corn futures dramatically.
Pearson: What's going on with the soybean market and the rally there this week particularly on Friday?
Jackson: Well, Mark, what we have here is the larger context that we think some time in the next 18 months we'll see $9.50 to $10 bean futures. We must take prices to a level where you will stimulate dramatic year to year acreage expansion in northern Brazil. Their cost of production is high, you're trying to overcome a very strong currency there and we certainly don't believe at these prices you're going to get the six million more acres of soybeans that we need each and every year in the western hemisphere. You've got to expand acres almost solely in South America now to compensate for acreage in the U.S. going to corn for ethanol and we don't think these kind of prices are going to do it. So, the big pictures is that we're moving higher, you've got the vegetable oil tightness thing working too with the biodiesel and we think the long-term trend is up. Now, that doesn't mean we can't have a record crop with record good weather this year and have a moderate break in prices into harvest. But the market understands already that we may have an '08, '09 crop cycle, not this coming year but the following year, that's out of control. We're going to go from the biggest stocks in beans this year ever to cutting that inventory in half this year and we could very well be on the road to running out of beans in 2008. That's the problem the market's trying to solve right now.
Pearson: You're not in a hurry to sell soybeans?
Jackson: No, we think they actually have better fundamentals than the corn, Mark, with the 12 million more corn acres having robbed acres away from soybeans.
Pearson: Alright, well there's a lot of people in the livestock industry looking at what the price of corn and bean meal has done, they feel a little bit robbed. Walter, let's talk about the livestock business these days. Fed cattle producers first, what do you see ahead in this finished cattle market?
Hackney: For three weeks, Mark, we've been going through a real dilemma in the fed cattle market. Three weeks ago we had 98 to $1 a pound. There were a few $1.02 fed cattle out there per hundred weight. There were some $1.60 to $1.63 dressed cattle out there three weeks ago. Today we're at $1.47 dressed and we're at 92 cents. Now, that sounds like a good market. The problem with that is many of these cattle that we're marketing today considerate of the high production cost that the high priced corn has created several of those cattle are not going to break even at 91 or 92 cents a pound. Now, as far as the outlook we've got to correct the issue of meat usage, the box beef is not moving as properly as it would to support a market around 95 to 98 dollars. So, the cattle feeder is sitting kind of in limbo waiting on more of a demand item to take care of the dressed beef or box beef industry.
Pearson: Alright, so Walter, walk us through the balance of the summer. We talked earlier about the fact that consumer confidence is up but higher gasoline prices have probably impacted the consumers to a certain extent.
Hackney: No question that it is impacting the consumer. On the same token there hasn't been that much restriction in travel, there hasn't been that much restriction in usage of gasoline. On the same token even with the high priced beef that we had there hasn't been that much restriction on the usage of the beef. It might be that with the increase in tonnage that we're looking at which is a surprise right now that the cattle in the feedlots are actually heavier than they were, that surprise, the extra tonnage may be part of the problem that is being created. As far as the summer goes, Mark, I think personally if we get to 95 dollar cattle and can hold 95 through the summer toward fall I think we'll be, we'll have done an excellent job in marketing.
Pearson: Bigger tonnage but fairly current, is that accurate?
Hackney: Yeah, we haven't recovered from the disaster of the spring or later winter/early spring, we haven't recovered from that yet. We still have set these cattle back six weeks. They're still current in regard to finish, nothing over done but the fact is they've had to feed them longer to get the weight back.
Pearson: Alright, speaking of feeder cattle and getting them bought, a pull back on the board this week and there's calves on the ground out there. Anybody pricing any of them?
Hackney: There is a few, it's very limited right now. You'll hear stories for the next ten days, possibly to the middle of June about a few cattle bringing $1.20 at 600 pounds in Montana, you might hear some stories of cattle bringing $1.15 to $1.20 weighing five and a half to six. But the fact is the numbers aren't going to be moving until we get more of a feel for the trend that will develop toward fall on this corn market that Doug's talking about.
Pearson: Alright, let's talk also, Walter, about what you see ahead in the hog business as you look at that right now. Again, that expansion, last time you were on with the hogs and pigs report was basically zero. They said one percent, you said maybe it would be close to zero. Are we starting to see that? Are we seeing more pigs?
Hackney: Mark, it was one tenth of one percent. But, you know, it was so close to zero, it's still close to zero. There is not that much expansion anywhere. This cost of production is such a serious item cutting into the bottom line so deeply that this 47 and 48 and 49 dollar hog is barely breaking even for the hog producer. There is no incentive for expansion. As we go through the summer I suspect that we will, in fact, entertain near 2 million head of hogs a week kills. We're going to be close to that. We're killing four hundred and some thousand hogs a day. It's a surprise to everyone. They're wanting to say the government report on the hog and pig report wasn't accurate. I don't think that at all. I think people are marketing these hogs better. They've got a better grip on their inventory control because of the high cost of production. Market weights are actually lower than they have been.
Pearson: What about pricing, Walter? What do you want to do at this stage of the game if you're raising hogs?
Hackney: I don't know that you can hedge but I think you can use an option program to protect your losses. I think a producer needs to figure out what is it that they can stand as far as loss. Anything beyond that if the hog market would go toward 45 cents a pound toward fall I think the producer needs to protect himself on that difference above what he can afford to lose himself.
Pearson: Alright, so get the pencil out. Walt Hackney and Doug Jackson, as usual some great insights, we appreciate your input so much on the show. That will wrap up this edition of Market to Market. But if you'd like more information from Doug and Walt on where these markets just may be headed visit the Market Plus page. It's at our Market to Market Website. And remember, you can download audio podcasts of our market analysis and our Market Plus segments free of charge at our Website. Of course, be sure to join us again next week when we'll learn how one producer is milking a profit for non-pasteurized dairy products. So, until then, thanks for watching. I'm Mark Pearson. Have a great week.
