Hello, Dean Borg. Mark Pearson is off this week. For the most part, 2006 was a good year for rural Americans. As usual, Mother Nature played a starring role in the agricultural drama. Nationally, drought reduced corn and wheat yields, while August rains boosted the soybean crop. U.S. pork producers enjoyed their third consecutive year of profitable prices, despite herd expansion and increased concentration. Cattle producers also benefited from favorable prices. Without a doubt though, rural America's biggest story in 2006 was the growth of renewable fuels -- especially ethanol. Current U.S. production capacity now exceeds 5 billion gallons annually, a figure that is expected to double when 70 other plants in construction come on line. And with lawmakers about to begin work on the next Farm Bill, renewable energy is predicted to dominate the agenda.
The new Congress – soon to be controlled by democrats – will no doubt have the attention of farm interests early on as one of the first congressional actions will deal with energy – both oil and alternative fuels.
The oil issue is likely to be first out of the block. Many in congress are concerned about the ability of the federal government to recover royalties that some lawmakers believe have been unfairly avoided by oil and gas companies drilling in the Gulf of Mexico.
There is also talk of rolling back tax breaks for oil -- some of which were approved by congress just 18 months ago
California Democrat and soon-to-be Speaker of the House Nancy Pelosi said, "What we'll do is roll back the subsidies to Big Oil and use the resources to invest in a reserve for research in alternative energy."
Alternative energy is also a top priority in the farm bill.
Senator Harkin, (D) Iowa: "Energy just may actually be the engine that pulls the farm bill, or pushes it one way or the other."
Iowa democrat Tom Harkin – who will chair the senate agriculture committee come January -- says
Congress will have to determine how to move the agriculture agenda towards renewable energy and energy independence.
While ethanol production is booming, there is a major transition coming when farmers will be able to sell their plant waste left in the field after harvest ... or grow other crops such as switchgrass to produce cellulosic ethanol.
Senator Harkin says he believes it will be up to Congress next year to make sure that transition happens smoothly by helping finance the equipment and infrastructure needed to meet demand.
But there is concern that next year there won't be nearly as much money budgeted for agricultural spending – including ethanol projects -- as the 2007 farm bill is written. Some commodity groups are calling for the same level of crop and dairy subsidies as the 2002 farm bill provides. And the American Farm Bureau would like the same level, plus an adjustment for inflation.