The Impacts of The Food, Conservation and Energy Act of 2008 Policies on Southern Agriculture The Trade Title & The FCEA Linkage to U.S. WTO Commitments Kansas City, Missouri July 8-9, 2008 Mechel S. Paggi Director, Center for Agricultural Business College of Agricultural Sciences and Technology California Agricultural Technology Institute California State University, Fresno
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The Impacts of The Food, Conservation and Energy Act of 2008 Policies on Southern Agriculture
The Impacts of The Food, Conservation and Energy Act of 2008 Policies on Southern Agriculture The Trade Title & The FCEA Linkage to U.S. WTO Commitments. Mechel S. Paggi Director, Center for Agricultural Business College of Agricultural Sciences and Technology - PowerPoint PPT Presentation
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The Impacts of The Food, Conservation and Energy Act of 2008 Policies on Southern Agriculture
The Trade Title&
The FCEA Linkage to U.S. WTO Commitments
Kansas City, Missouri July 8-9, 2008
Mechel S. PaggiDirector, Center for Agricultural Business
College of Agricultural Sciences and TechnologyCalifornia Agricultural Technology Institute
California State University, Fresno
TRADE-- Establishes a consultative group to combat child and labor in the production of U.S. commodity imports.
-- Establishes Softwood Lumber Importer Declaration Program to require importers of softwood lumber to "declare" they are importing lumber consistent with international agreements, primarily the Softwood Lumber Agreement between the U.S. and Canada. Applies civil penalties to importers for knowingly violating the law.
-- Repeals the Export Enhancement Program.
-- Repeals the GSM-103 export credit guarantee program as well as the 1 percent fee cap on the GSM-102 program. Funding for GSM-102 set at $40 million in mandatory spending and authorized to make at least $4 billion in credit guarantees available each year.
-- Market Access Program funding is kept at $200 million in mandatory spending per year.
-- Technical assistance for specialty crop funding is ramped up to $9 million in 2012 (total funding: $37 million over 5 years).
-- Makes a minor change to the "buy American" provision in the Emerging Markets and Facilities Loan Guarantee Program to allow a waiver of that provision if such goods are not available.
-- Authorizes $60 million in appropriations for Germplasm Conservation.
Trade : Prepared by the Senate Agriculture, Nutrition and Forestry Committee
• REFORMS FOOD AID OPERATION AND OVERSIGHT: The bill addresses many of the shortcomings of U.S. international food aid programs identified in an April 2007 Government Accountability Office report, such as lack of attention to food aid quality and inadequate assessment of development in recipient countries.
• SPEEDS EMERGENCY FOOD RESPONSE: Changes made will increase the ability of the U.S. government to pre-position U.S. commodities in overseas warehouses, thus allowing expedited food donations to countries facing dire emergencies.
• PROMOTES DEVELOPMENT BY MODIFYING THE BILL EMERSON HUMANITARIAN TRUST: P.L.480 title II funds are intended for both emergency and agricultural development assistance. The bill reforms operation of the Bill Emerson Humanitarian Trust and clarifies that the Trust should be used as a source of funding in humanitarian emergencies in order to maintain more funding under Title II for development.
• ESTABLISHES A LOCAL AND REGIONAL PROCUREMENT PILOT PROGRAM: The bill includes a pilot program funded at $60 million over four years for the purpose of evaluating the effectiveness of local or regional procurement of food for humanitarian assistance. The Secretary of Agriculture is required to establish projects using locally purchased food in a variety of regions and situations, and to arrange for independent evaluation of the projects’ efficacy in a report to the House and Senate Agriculture Committees prior to the expiration of this bill in 2012.
• REFORMS AND EXTENDS EXPORT PROGRAMS: The bill modifies export credit guarantee programs to make them consistent with the ruling in the World Trade Organization cotton case and reauthorizes the Market Access Program, Foreign Market Development Program, and the Emerging Markets and Facilities Loan Guarantee program.
• EXPANDS TECHNICAL ASSISTANCE FOR SPECIALTY CROPS: This program provides financial assistance to producers and exporters of specialty crops in addressing technical and sanitary and phyto-sanitary barriers against their products in overseas markets. Funding for the program is increased from the current level of $2 million annually to $9 million annually by 2012.
Trade : Prepared by the Senate Agriculture, Nutrition and Forestry Committee
Fiscal Year Trade Forecastsfor U.S. Agricultural Products
Changes in 2008 Forecast Since FebruaryAg Exports rise $7.5 billion to record $108.5 billion
AgImports rise $2 billion to record $78.5 billionAg Surplus reaches record $30.0 billion
A Trade Title Written in a Time of Plenty
U.S. Agricultural TradeU.S. Agricultural Trade
Trade Value ($Billion)
27.3
49.1
59.8
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
'87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07
ExportsImports
Trade Surplus
Higher prices for grains & soybeans and larger grain volumes drive half of the export gain in 2008. Import growth continues at faster pace.
Record
78.5
11.9
81.9
70.0
108.5
30
Cheaper Dollar Influence Doesn’t Hurt
Grains & Feeds $2.6 billion to record $35.3 billion wheat (+) $500 million – higher prices offsets some vol reduction animal feeds: corn (+) $500 million – (+) 1 mmt with no competition and (+) prices anticipating tighter US mkt; feeds/fodders – (+) $ 650 mil on (+) vol for DDGs rice (+) $600 – export unit value jumps to $590/ton and some vol increase
Animal Products $2.5 billion to record $20.5 billion dairy prods (+) $1.1 bil – (+) vols, esp. NFDM, on strong demand & NZ drought pork (+) $475 mil – (+) 200,000 mt mainly on strong China demand
Oilseeds and Products $1.8 billion to record $20.7 billion soybeans (+) $1.3 bil – (+) 2.3 mmt and unit values on extended late-season sales
Horticultural Products $800 million to record $20.5 billion fruits/vegs/tree nuts (+) 600 million – good supplies, strong demand, weak dollar
Cotton $500 million but still a record 5.1 billion volume lowered 300,000 mt on technical adjustment to China stocks and import demand
Major Bulk Commodity Export Vol 2.6 mil. tons to record 138.4 mil. tons volume is up 13.7 mmt from 2007 and 2 mmt above previous record set in 1980 largest annual increases: corn +8.9 mmt, sorghum +2.6 mmt, wheat +1.8 mmt
FY’08 Exports Revised Since February FY’08 Exports Revised Since February AgExports Up AgExports Up $7.5 Billion to Record $108.5 Billion Major Bulk Commodity $7.5 Billion to Record $108.5 Billion Major Bulk Commodity Volume Up 2.6 mmt to Record 138.4 mmtVolume Up 2.6 mmt to Record 138.4 mmt
Demand & supply factors at work in a relatively open market Demand: consumer preferences (variety, luxury, ethnic foods); population growth (2.7 million/year); high disposable income Supply: capital flows build foreign capacity; technology transfer; supply chains increasingly global; production costs (lower wages favor labor-intensive crops)
Key observations for FY 2008 – imports rise $6 bil to record $76 bil Import volume growth slows slightly with weaker dollar and consumer spending, but higher prices keep value growing near the faster pace seen in the past 5 years Grains, oilseeds & products add $4 billion in 2008, mostly due to higher prices, but some vol increase too Tropical products (natural rubber, coffee & other products) continue to grow above trend with strong global demand and record to near-record prices
Ag Imports Continue Four Decades of ExpansionAg Imports Continue Four Decades of Expansion
Top Ag Markets and Ag Suppliers (NAFTA)Top Ag Markets and Ag Suppliers (NAFTA)
0 2 4 6 8 10 12 14 16Billion Dollars
China
Japan
EU
Mexico
Canada
2008f20072002
0 2 4 6 8 10 12 14 16 18Billion Dollars
Brazil
China
Mexico
EU
Canada
2008f20072003
Top Ag Markets… Top Ag Suppliers…Top Ag Markets… Top Ag Suppliers…
Agriculture & The WTO Agriculture & The WTO Objectives and ObligationsObjectives and Obligations
IncreaseMarket Access
Eliminate Export
Subsidies
ReduceTrade Distorting
DomesticSupport
$19.1 billion
U.S. NA WithoutAcreage Controls
2002 – 2005$58.3 - $71.8
2002 – 2005 *$10.2 billion ( $6.9 - $12.9)
Dairy: $ 4.9 billion Sugar: $1.1 billion
* Important that CCP’s and Crop Ins are in non-product specific category
Direct PaymentsFood Stamps
Etc.
As Reported 10/4/07Prior to this notice, the U.S. last Notified the WTO of its domestic support levels in March
2004 for the years 2000-2001.
How Much are Trade-Distorting Crop Supports The Issue for the Future?
B. Final Bound Total Ams: A Tiered Formula1. Tiered reduction formula(a) Reductions in Final Bound Total AMS
11. The Final Bound Total AMS shall be reduced in accordance with the following tiered formula:
(a) where the Final Bound Total AMS is greater than US$40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be [70] per cent; (b) where the Final Bound Total AMS is greater than US$15 billion and less than or equal to US$40 billion, or the equivalents in the monetary terms in which the binding is expressed, the reduction shall be [60] per cent; (c) where the Final Bound Total AMS is less than or equal to US$15 billion, or the equivalent in the monetary terms in which the binding is expressed, the rate of reduction shall be [45] per cent.
Revised draft modalities for agriculture
Ambassador Crawford FalconerChairman
Committee on Agriculture, Special Session
Problems for the Future? Problems for the Future? Current Limit: $19.1 Billion With Reduction of 60%: $7.64
USDA Baseline Production Based AMS Estimate2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
1/ From original U.S. AMS dairy calculations. Average for 1986/87-1988/89 marketing years, CIF.2/ Estimated calendar year.3/ Cheddar, calendar year from NASS.4/ Northern Europe fob price, cheddar, low spring price, from FAS dairy circulars. Adjusted by average freight and handling charge (12.5 cents per pound) from ITC report on tariff equivalents, April 1990.5/ Northern Europe fob price, cheddar, high fall price, from FAS dairy circulars. Adjusted by average freight and handling charge (12.5 cents per pound) from ITC report on tariff equivalents, April 1990.
Revised AMS Calculations for Dairy
Dairy and Sugar Components of AMSWith Alternative Dairy Calculation
0
1
2
3
4
5
6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Bil
lio
n D
oll
ars
RevisedDairy
Sugar
FAPRI3/08
U.S. Amber Box AMS Projections
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Counter Cyclical
Marketing Loan
Alt Dairy
Sugar
$12.9 Billion 2005
$9.6 Billion 2002
New Doha Limit $7.64 Billion
UR AMS Limit $19.1 Billion
$7.6 billion
About $5 billionThe Box for Counter Cyclical
Payments With F&V Restrictions
Unlimited? – Place for Direct Payments
(Currently CCP’s Are reported as Non-product specific Amber, exempt under de’minis 5% of total Production Value Trigger)
Marketing Loan Benefits
De minimis exemption cuts
non-binding (2.5% of value of production from 5%) ?
2007 $300 Billion
$7.5 Billion $15 Billion
Crop Insurance May Be a Problem
Non Product Specific Amber SupportSubject to De Minimis Exemptions
Crop Insurance Has Been in this Categroy
Average Crop Revenue Election (ACRE) Could Be a Real Problem
“Agriculture Deputy Secretary Chuck Conner says that since Congress approved the legislation last week, department analysts have delved deeply into ACRE’s provisions and were troubled by what they found. Assuming a high rate of participation in the program and national corn, wheat and soybean prices at $3.25, $5 and $7 per bushel, respectively, USDA could pay out around $16 billion to ACRE participants who produce those three crops in 2009 alone, says USDA.”
What about other Doha Round Changes?
Other Issues
• Product Specific Limits
For the United States, the limits to the value of support that may be provided to specific products under paragraph 1(b) above shall be [110] [120] per cent of the average product-specific amounts that would result from applying proportionately the legislated maximum permissibleexpenditure under the 2002 Farm Bill for specific products to the overall Blue Box limit of 2.5 per cent of the average total value of agricultural production.
For the United States only, the product-specific AMS limits specified in the schedule shall be the resultant of applying proportionately the average actual product-specific AMS support in the [1995-2004] period to the average actual total AMS for the Uruguay Round implementation period (1995-2000).
WORKING DOCUMENT No. 6FINAL BOUND TOTAL AMS: A TIERED FORMULA
WORKING DOCUMENT No. 8BLUE BOX
FAPRI3/08
FAPRI3/08
FAPRI3/08
FAPRI3/08
If the Future is CertainIf the Future is Certain
High Prices make government commodity supports $0.00 to below High Prices make government commodity supports $0.00 to below $1.0 billion, well within new commitments. Dairy and Sugar can be $1.0 billion, well within new commitments. Dairy and Sugar can be accommodated. ACRE Program just accommodated. ACRE Program just
a safety net.a safety net.
Direct Payments must remain in green box, $5.2 billion, even if Direct Payments must remain in green box, $5.2 billion, even if planting restrictions have to go (cotton case).planting restrictions have to go (cotton case).
Countercyclical payments notified as blue box, within commitments. Countercyclical payments notified as blue box, within commitments.
De minimis exemption cuts non-binding (2.5% of value of production De minimis exemption cuts non-binding (2.5% of value of production from 5%) if Crop Insurance payments do go through the Roof. from 5%) if Crop Insurance payments do go through the Roof.
What Will The Future Bring?
Table 35—CCC Net Outlays by Commodity and FunctionFiscal year
Total 19,223 32,265 22,105 15,680 17,425 10,575 20,187 20,211 13,785 13,1901. Does not include CCC Transfers to General Sales Manager. 2. Includes Export Guarantee Program, Direct Export Credit Program, CCC Transfers to the General Sales Manager, Market Access (Promotion) Program, starting in FY 1991 and starting in FY 1992 the Export Guarantee Program - Credit Reform, Export Enhancement Program, Dairy Export Incentive Program, and Technical Assistance to Emerging Markets, starting in FY 2000 Foreign Market Development Cooperative Program and Quality Samples Program, starting in FY 2003 Specialty Crops. 3. Includes cash payments only. Excludes generic certificates in FY 86-96. E = Estimated in FY 2008 President's Budget based on 'November 2006' supply and demand estimates. The CCC outlays shown for 2002-2008 include the impact of the Farm Security and Rural Investment Act of 2002, which was enacted on May 13, 2002. Minus (-) indicates a net receipt (excess of repayments or other receipts over gross outlays of funds). FY 2004-FY 2005 includes revised dairy outlays.
Information contact: Richard Pazdalski Farm Service Agency-Budget at (202) 720-3674 or [email protected].