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The First Decade of the New Millenium

posted on January 8, 2010


Bitterly cold Arctic air blew through the central portion of America this week pushing temperatures well below zero. The massive low pressure system also packed gale-force winds and dumped snow and ice from Texas to the Canadian border.

North Dakota officials issued a statewide travel alert Thursday, but cold was the bigger concern. Wind chills Thursday morning were as low as 52 degrees below zero in the northwest part of the state.

In Florida, record low temperatures prompted tourists to abandon bikinis for winter coats as citrus growers worked to protect their $9.3 billion industry from the tightening grip of "Old Man Winter."

While the first month of 2010 seems destined for the record books, it's not as if the previous decade was without its share of calamities -- both from Mother Nature and Uncle Sam. Andrew Batt looked back at the decade of the "oughts" and filed this report.

The First Decade of the New Millenium

At the dawn of the new millennium, America was poised to continue the greatest economic expansion in history but a decade of unforeseen disasters would keep U.S. interests on their heels. The ups and downs were clearly evident in rural America and Washington where the aftermath of September 11th delayed the decade's first farm bill.

By the time President Bush signed the 2002 farm bill, alongside then-Agriculture Secretary Ann Veneman, the omnibus spending package was hailed as a critical safety net for American farmers and ranchers. (May 17, 2002)

President Bush: "And that's why I'm pleased to sign the Farm Security and Rural Investment Act of 2002." (Bush Look Back, Jan 16, 2009)

Six years later, the President's mood towards the latest farm bill was strikingly different. Bush exercised his seldom-used veto power to strike down the 2007 farm legislation. Despite the President's disapproval, strong bi-partisan support in Congress was able to override his veto.

Rep. Rosa DeLauro, D-Connecticut - "A vote of 318 --it's very sweet!"

Rep. Randy Neugebauer, R-Texas - "This is a victory for America. It is important America has a strong agricultural economy."

Rep. Bob Goodlatte, R-Virginia - " We have not a 2-to-1 majority, but 3-to-1 majority vote. A 318-to-106 vote is very significant." (May 16, 2008)

Most agricultural legislation in the past decade took global markets into consideration. Foreign trade expansion remained a central goal for President Bush – an issue he took directly to the Heartland.

President Bush: "We need to open foreign markets to Iowa pork. I need the trade promotion authority." (Bush Look Back, Jan 16, 2009)

Bush's crown jewel of free trade would come in his 2nd term with the passage of the Central American Free Trade Agreement or CAFTA. CAFTA passed by a razor-thin one vote margin in a late night Congressional session. (Bush Look Back, Jan. 16, 2006)

The successful passage of CAFTA was matched by the lack of any binding trade agreement at World Trade Organization meetings. Following riots during the 1999 WTO meeting in Seattle, subsequent gatherings in Cancun and Hong Kong yielded few, if any, substantial breakthroughs for agricultural trade.

The somewhat tenuous nature of trade agreements between the U.S. and its domestic partners would be tested throughout the decade by an unforeseen discovery in the American livestock sector.

For America's cattle producers, 2003 was a year for the record books. Tight supplies coupled with blistering demand resulted in the highest prices in history, and analysts expected the trend to continue well into to 2004.

But all of that changed late in December, when the Agriculture Department confirmed that Mad Cow Disease had been discovered in a Washington State herd.

While the malady proved to be isolated to a single cow that originated in Canada, the event sent shockwaves through the industry. More than 50 foreign countries banned imports of American beef, and cattle prices plummeted as 90 percent of the U.S. beef export market vaporized.

Gregg Doud, Chief Economist, NCBA: Our primary concern has been in regard to consumer confidence, in that 90% of our product is consumed domestically. And we've been very heartened in the last week with all the reports and all the economic data coming back indicating that consumer demand for beef has been absolutely rock solid through all of this. And that has been very helpful to the marketplace. But now I think the realities of the loss of 90% of our export market are of extreme concern and it is our number one priority to get to work now immediately to get those export markets back up and on track as quickly as we can.

The road to recovery from America's brush with Mad Cow Disease was long and arduous. Exports to Japan, America's most lucrative beef export market, wouldn't fully resume for years.

Domestic markets were quicker to recover, but in the commodity pits traders were more focused on the fundamentals of supply and demand. And there were plenty of both in 2004.

Keith Collins, USDA Chief Economist: "We project farm exports at $59 billion this year and that nearly equals the all-time record high. Had it not been for the finding of BSE, and the lost U.S. beef exports, total U.S agricultural exports surely would have been a record of several billion dollars."

U.S. farmers reaped record harvests of corn, soybeans and cotton in 2004. Fortunately, the global appetite for grain and oilseeds was outstanding, and commodity prices soared to record highs. But it was only a preview of what was to come...

President George W. Bush: "America is addicted to oil." (January 2006)

Retail gasoline prices exceeded $3 per gallon late in 2005, en route to $4 per gallon in 2006. Washington responded by including a Renewable Fuels Standard, or RFS, in the 2005 Energy Bill. The RFS established a minimum ethanol production requirement of 4 billion gallons in 2006 ramping up to 7.5 billion gallons by 2012.

Just two years after the original RFS became law, Congress increased the production mandate to 36 billion gallons by 2022.

Since corn is the predominant feedstock of U.S. ethanol, the expansion also fueled an historic bull market in commodity prices. Corn futures prices contracts soared to record highs in 2007 on their way to an all-time high of 7.54 for the nearby July contract on June 27, 2008.

With much of the U.S. corn swallowed up for ethanol, other commodities also skyrocketed. Nearby soybeans closed at a record $16.58 on July 3, 2008.

But almost as quickly as it began, the renewable fuels bubble began to fall apart. Critics blamed high-priced corn for soaring food prices -- a charge dismissed by ethanol proponents who associated higher food prices with soaring energy costs.

(Grassley's Corn Flakes)

Critics also said increased ethanol production could lead to rapid deforestation, which would release massive amounts of carbon and thereby exacerbate global climate change. Despite the fact that ethanol burns cleaner than gasoline, debate continues on its environmental merits.

While lawmakers and environmentalists linked energy legislation with climate change across the globe, rural Americans dealt with record breaking natural disasters.

In 2002, drought tore through the grain belt, wrecking havoc on crop yields and boosting disaster assistance payments from Washington.

Sen. Kent Conrad, D-ND: "Do we need disaster assistance?"

Crowd: "Yeah!"

Conrad: "Do we need it now?"

Crowd: "Yeah!"

Conrad: "Well, I think it's loud and clear…"

(Senate Approves $6 Billion in Drought Aid, September 13, 2002)

Urban and rural citizens were walloped by Hurricane Katrina in 2005. The record-breaking storm killed thousands across Louisiana, Mississippi, and along the Gulf Coast. Crops along the storm's path were also devastated. (Agricultural Cost of Katrina Mounts, September 23, 2005)

Only 15 years after a so-called100-year flood washed away the Upper Midwest in 1993, the floods of 2008 shattered previous records. Late winter snowfall and heavy spring rains put millions of acres of farmland underwater, drowned livestock, and destroyed homes throughout the grain belt. (Battle With Mother Nature Not Over, June 20, 2008)

Slug Obama Inauguration

2009 began with the inauguration of America's first black president, who quickly injected $787 billion dollars into stimulus projects in hopes of returning the U.S. economy from the brink of destruction.

While wars in Iraq and Afghanistan, health care reforms and other issues also were on his agenda the economy remains his top priority.

And America's farmers and ranchers begin the second decade of the new millennium in much the same fashion as it entered the first... emerging from recession, buffeted by the winds of government policy, and concerned about volatility in the commodity markets.

In fact, the only thing certain about the rural economic outlook -- is uncertainty. For Market to Market, I'm Andrew Batt

 


Tags: Barack Obama economy ethanol George W. Bush Iraq Mad Cow news policy politics research rural