The farmer’s share of every food dollar has declined to just 11.6 cents according to a new USDA report. This is the share of food costs that can be traced back to production. The rest of the dollar goes to processing, packaging, transportation, retailing and other factors that go into moving the raw commodity to consumers’ tables. Agriculture groups are quick to point out that this information counteracts claims that using corn for ethanol is a key reason why food prices are rising.
It does not appear that farm programs will be affected much if at all in the current budget effort. Congress was in recess this week, but staff members are working behind the scenes to hammer out a compromise bill to fund government operations for the rest of this fiscal year. The process is more complicated than just agreeing on the amount of spending and where to make cuts. Some members of the House want to attach riders to the bill that would almost certainly draw a presidential veto.
Finding a way to satisfy both sides makes the process very difficult. However, both sides want to avoid a government shutdown, which is in the offing if no compromise can be reached, so some agreement is likely. However, Congress will probably look harder at mandatory spending programs when they start work on appropriations bills for fiscal 2012. And that could include such things as the fixed payments to farmers that were part of the expiring farm bill.
Trade negotiators from the U.S. and Colombia concluded meetings without agreeing on a revised bilateral free trade agreement last week. The original free trade agreement was worked out years ago and has the support of most farm groups and agribusiness but has never been submitted to Congress for approval. Why? Because some members of Congress oppose the deal due to concerns about how Colombia treats its laborers. Negotiations between the U.S. and Colombian officials are expected to resume in a few weeks. The AFL-CIO labor group in the U.S. says they will continue to oppose all three pending free trade agreements. The president of the group said a recent study by the Economic Policy Institute shows that the agreement with South Korea would eliminate 150,000 U.S. jobs. Why do they wield such clout?
The AFL-CIO is made up of 58 trade unions and claims membership of 12.2 million. There have been new challenges to USDA’s decision to deregulate biotech alfalfa. Several environmental groups and groups representing organic farmers have filed suit claiming that USDA’s decision violates the National Environmental Policy Act and the Plant Protection Act. USDA decided to deregulate biotech alfalfa in 2005, but that decision was overruled by a court decision in 2007. That court said that USDA had to complete an Environmental Impact Statement before deregulating the product.
USDA has now completed the required study, but the groups bringing the lawsuit say that USDA failed to examine all the environmental effects of deregulation and now add “socioeconomic “ effects of deregulation to their demands for the study. The new lawsuit probably won’t affect alfalfa planting this spring.
Ethanol groups and the National Corn Growers Association are working on a plan to restructure the 45 cent per gallon blenders’ credit so that they can have a proposal to present to Congress. In recent months the various ethanol groups have supported very different approaches to supporting the ethanol industry. But with some members of Congress now proposing to eliminate the blenders’ credit altogether (see page one), the ethanol groups are working to present a united front. Some options under consideration include a variable tax credit, diverting the money to biofuel infrastructure, higher ethanol blends, and measures to allow ethanol from corn to be considered an advanced biofuel under the EPA definition.