Tuesday, November 13, 2007

More on Subsidies; articles from American Newspapers

As the Senate continues its debate on the Farm bill, it seems that very little will change from the current US farm policies. Here is the latest from US newspapers:

New York Times In Farm Belt, Ethanol Plants Hit Resistance;
Washington Post Senate's Farm Bill Includes $10 Billion in New Aid;
Washington Times: An unworthy farm bill

November 13, 2007
In Farm Belt, Ethanol Plants Hit Resistance
SPARTA, Wis. — When plans were announced for a new ethanol distillery on the outskirts of this city of 9,000, residents complained that it would mar the view from the municipal golf course. They worried that its emissions would taint the milk-based products made at nearby Century Foods International, one of the community’s biggest employers. They even argued over whether the plant would reek like burned molasses or blackened popcorn or fermenting beer.
The T-shirts opponents printed up told the story: “Good idea. Bad location.”
For years, the arrival of an ethanol distillery in agricultural America was greeted mainly with delight, a ticket to the future in places plagued by economic uncertainty. But in the nation’s middle, the engine of ethanol country, the glow is dimming.

In Kansas, Illinois, Indiana, Minnesota and even Iowa, the nation’s largest corn and ethanol producer, this next-generation fuel finds itself facing the oldest of hurdles: opposition from residents who love the idea of an ethanol distillery so long as it is someplace else.
“What they are trying to sell we aren’t buying,” said Deb Moore, who owns a sandwich shop and soda fountain here.
The disputes have left some proposed plants waiting, mired in lawsuits; a few have given up.
“There is a campaign of sorts that is seeking to slow and preferably to stop the growth of the ethanol industry,” said Matt Hartwig, a spokesman for the Renewable Fuels Association, a trade group based in Washington. “We have to get through a barrage of mud pies to get our message out.”
These are not the better-known philosophical opponents to ethanol, those who question the efficiency of corn-based ethanol as an energy source, blame ethanol for rising food prices, or disagree with the federal subsidies that have long held up the industry.
These people are farmers. Or they know a farmer. Or their grandfather was a farmer and, as in so many farm families, ethanol has meant new hope for the fading towns built on corn fields. The biggest complaints are cousins of the gripes brought about by proposed paper mills, landfills, prisons and the like: an increase in noise, traffic, odor, emissions and demand on the water system.
“No, no, no, we’re not against ethanol production whatsoever,” said Lonnie Nation, who lives near New Castle, Ind., where he and others have posted signs, filed a lawsuit and were going door to door this month to stop a new plant. “But if you put it where they want to, you’re going to be squeezing all our homes between an ethanol plant and a prison. What will that do to home values?”
Some experts say the local protests reflect a new anti-ethanol mood spurred by a slow but steady drumbeat of negative attention on the industry. Across the Midwest, questions about ethanol have been raised by environmental advocates, livestock owners have complained about soaring prices for corn feed and farmers have fretted about how expensive some farmland has become.
“That wonderful aura that the ethanol plants had may be wearing off a little,” said Wallace E. Tyner, an agricultural economist at Purdue University.
Industry advocates play down the size of the opposition and suggest the increase in objections to new plants is simply a factor of math; 131 plants are now operating and more than 70 others are under construction, and the vast bulk of them are in the Midwest.
That is a marked increase from less than three years ago, when Congress enacted an energy law that included a national mandate for the increased use of renewable fuel in gasoline, setting off the ethanol rush. In January 2005, more than a quarter century after the commercial ethanol industry got started, just 81 plants were functioning.
“The fights are rare, and sometimes it’s just 11 people in a town of 5,000 or 6,000,” said Monte Shaw, executive director of the Iowa Renewable Fuels Association, a trade group. In Iowa, which has more ethanol distilleries than any other state, residents near Grinnell filed a lawsuit to try to stop a company from building an ethanol plant. “There are some people who would rather see their town dry up and blow away than change the status quo,” Mr. Shaw said.
The local strife coincides with what is already a moment of tumult for the ethanol industry. In recent months, an enormous supply of ethanol has glutted the market, sinking its price and sending a chill through the ethanol boom.
At least three proposed plants have halted construction recently, industry officials said, including one in Reynolds, Ind. Only two years ago, Mitch Daniels, the Indiana governor, had held up the town as a symbol of the shift to renewable energy sources and nicknamed it BioTown U.S.A.
In October, the owners of at least one long-running plant — one that opened in 1983 in Grafton, N.D., and made 10.5 million gallons a year — announced it would shut down for now, thanks to market forces.
Experts debate whether the current ethanol glut is the start of the end to the rush to corn-based ethanol or merely a temporary correction as transportation lines are developed from the Midwest to bigger markets on the coasts. Either way, residents’ complaints about proposed plants have only added to the cascade of bad news for ethanol.
“It’s like the dot-com industry,” said Anne Yoder, who is pressing to stop plans for an ethanol plant outside Topeka, Kan., and describes herself “not at all” as an activist but as “an ordinary soccer mom.”
“When ethanol first came along there was so much promise,” she said. “Maybe that’s starting to trickle off.”
This spring, when Ms. Yoder first began going door to door to her neighbors to describe her worries about a proposed facility, she expected to be dismissed by the many farmers in her rural county, who presumably would benefit from having a plant nearby to sell their corn.
“But I was shocked by what I heard,” she said. “They don’t want it here either. Farmers have been in the business for hundreds of years and what they told me is that they don’t have a limitless supply of water to produce more corn anyway. This isn’t as pretty a picture as everyone wants to make it out to be.”
Ms. Yoder, who said she now spent several hours a day on this battle and has helped to gather more than 500 names on a petition, has exchanged e-mail messages with the organizers of communities in other states fighting ethanol plants.
A loose network of opponents is growing. In June, officials from Portsmouth, Va., toured three ethanol plants in Wisconsin, meeting with neighbors and noting observations about odors (“like beer but with a metal smell mixed in,” for instance, residents in Wisconsin cautioned the Virginia officials).
“We just swap information and talk about what tactics they took that worked,” Ms. Yoder said.
Still uncertain is how much these protests will affect the industry.
In Sparta, city officials were the ones who initially sought out Coulee Area Renewable Energy to consider moving here, said Michael B. Van Sicklen, a lawyer for the ethanol makers. The plans were sailing along through annexation and zoning proceedings for months, he said.
Then complaints emerged from leaders at Century Foods International, which sits not far from the proposed plant. Residents signed petitions. They demanded meetings. They filed lawsuits.
In October, the ethanol makers and Century Foods International announced they had reached a deal — one so tentative, confidential and in flux that representatives on both sides declined to talk to about it. No one on either side would say where an ethanol plant might go now, only that it would not be here, in view of the golf course.

Senate's Farm Bill Includes $10 Billion in New Aid

By Dan MorganSpecial to The Washington PostTuesday, November 13, 2007; A02
Thanks to the application of a little last-minute budgetary magic, the farm bill before the Senate this week authorizes about $10 billion in new subsidies, price guarantees and disaster aid in the next decade, even as farmers report near-record profits.
There is a new $5.1 billion "disaster trust fund," as well as a revenue insurance program that would increase taxpayer costs by $4.7 billion over 10 years, according to the Congressional Budget Office. Spread through the huge bill are gains for producers of wheat, milk, sugar, peanuts, barley, oats and honey, and a new $1 million-a-year subsidy earmarked for camelina, a seed used to make biofuels.
"Pretty much everywhere you look, farm subsidies are being increased," said Daniel A. Sumner, an agricultural economist and adjunct scholar at the American Enterprise Institute, a conservative think tank.
Few predicted that outcome a few months ago.
Fiscal conservatives and a broad coalition of farm program critics were primed to pare back the subsidies. President Bush, stung by a barrage of criticism after he signed a 2002 farm bill laden with billions of dollars in new subsidies, was on the side of the reformers.
Worse, from the perspective of the farm bloc, Congress's new Democratic leadership reinstituted "pay-as-you-go" budgeting, which barred new spending that increases the fiscal deficit.
"It's made it much more difficult," Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) grumbled in September. "There's very little left for a lot of things."
But in a surprising turnabout engineered by key farm-state lawmakers, the bill on the Senate floor builds strongly on the price guarantees and supports included in the controversial 2002 legislation, which authorized $73 billion more in subsidies, food stamps and other agriculture-related spending. The Senate bill is more generous than a House version that passed in July.
To Sen. Judd Gregg (R-N.H.), a longtime critic of the program, this year's bill marks a "continuum" with the past rather than a change in direction.
"The farm program is agriculture's answer to 1930s socialism," he joked last week. "It's commissar policy."
One innovation would pay farmers $15 a year for each eligible acre -- whether they plant anything or not -- while guaranteeing them an additional payment if crop revenues in their state fall short of the norm.
Farmers choosing the program, which would start in 2010, would no longer be eligible for traditional farm subsidies. But budget officials predict that tens of thousands of farmers growing corn, wheat or soybeans will opt for it because traditional payments stand to be sharply reduced in coming years because of higher commodity prices.
The plan is backed by the National Corn Growers Association and is sponsored by Sens. Richard J. Durbin (D-Ill.), Sherrod Brown (D-Ohio) and Harkin.
In a Nov. 1 estimate, the Congressional Budget Office (CBO) determined that the program would reduce government costs by $2.4 billion between 2008 and Sept. 30, 2017 -- the official window for judging whether a program conforms to the pay-as-you-go budget rules.
Those savings would occur because farmers enrolling would forgo traditional federal price guarantees and direct payments during the budget window.
But the CBO said that about $11 billion in revenue-guarantee payments would be made after the 2017 cutoff date. So instead of reducing expenditures, the new program would actually cost $4.7 billion, after some delayed savings are factored in.
"Unfortunately, it's a tried-and-true gimmick because of how CBO counts," said Steve Ellis, vice president of Taxpayers for Common Sense. "The only change in this farm bill is they're getting more money than they got before."
Harkin himself has criticized another major new program included in the Senate version of the bill, a $5.1 billion, five-year trust fund to cover weather losses of farmers and ranchers.
The costs of the disaster program and other new farm bill initiatives would be offset in part by tightened tax rules on business. The tax changes, which would raise at least $15 billion in new revenues through 2017, were approved last month by the Senate Finance Committee and then attached to the farm bill to meet budget requirements.
The disaster fund has been a priority for Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Kent Conrad (D-N.D.), whose dry Western states are plagued by droughts and other natural disasters. But acting Agriculture Secretary Charles F. Conner last week blasted the Senate for "asking other sectors to bear the costs" of the farm bill.
Meanwhile, a wide range of commodity interests also stands to benefit from the Senate bill.
Sugar beet and sugar cane growers would get a new program aimed at protecting their share of the U.S. market in the face of an expected surge in Mexican imports. The 10-year cost: about $1.3 billion.
Tucked into the measure is good news for the companies that store and handle the South's peanut crop. The bill partially reinstitutes a program that was discontinued in 2006, allowing the companies to bill the government for some costs they incur under the federal price-support program. The CBO has set a $175 million, 10-year price tag on that.
According to records provided to The Washington Post by the Department of Agriculture, peanut warehousing is dominated by two large corporations that in the past received about half the federal storage payments. They are Virginia-based Birdsong and a joint venture between agribusiness giant Archer Daniels Midland and a Swiss partner.
The Senate version of the bill also continues a special break for peanut growers that was included in the 2002 legislation. Diversified farmers can keep collecting federal peanut subsidies even after they have reached the subsidy limit on their other farming operations.
Last week, Sen. Saxby Chambliss (Ga.), ranking Republican on the Agriculture Committee, fired back at critics of farm program spending, noting that commodity programs now claim only a 14 percent share of the $288 billion Senate bill, half the share of five years ago.
"There is a significant reform just in terms of pure dollars," he said.
Budget analysts say that is due less to declining spending on farmers than to runaway growth in the food stamp program, which is also funded in the bill. The number of recipients has jumped from 19 million in 2002 to nearly 27 million, boosting 10-year cost estimates by almost $200 billion.
Morgan is a contract writer of The Washington Post and a fellow with the German Marshall Fund, a nonpartisan public policy institution.
Article published Nov 13, 2007

Washington Times: An unworthy farm bill
November 13, 2007
Due to the ethanol boom and strong export markets, U.S. farm incomes are projected to reach a nominal record this year ($87.1 billion, up nearly 50 percent from 2006 and 70 percent higher than the 2000-03 average farm income). Meanwhile, both the Agriculture Department and the Congressional Budget Office forecast that currently robust prices for subsidized crops will continue over the next five years. Nevertheless, the five-year farm-reauthorization bill passed by the House earlier this year and the one now being debated in the Senate contain provisions that would extend for another five years the most egregious farm subsidies — direct payments — ever established. Unlike other farm subsidies, which are triggered when prices fall below support levels or Mother Nature devastates crop production, direct payments are made irrespective of the price level, current output or farm income. This year's farm bill projects making more than $26 billion in direct payments over five years.
Congress established direct payments in the historic Freedom to Farm Act of 1996. The fixed-but-declining annual direct payments, which were made regardless of market prices, were designed to wean farmers from decades of dependence upon other farm subsidies, which the 1996 act abolished. When the 2002 farm bill re-established those older subsidies, it also retained direct payments, whose only purpose was to help farmers overcome their addiction to the very commodity subsidies that were reinstated. The 2002 farm bill essentially set the stage for the Republican Party's spending orgy. The Environmental Working Group (EWG), which became famous in 2001 when it posted on its Web site a list naming every recipient of federal farm subsidies during the previous five years, has just released a major study on direct payments.
Over the next five years, under pending legislation, EWG estimates that (1) taxpayers will pay more than $10 billion to corn farmers, nearly $6 billion to wheat farmers, about $3 billion to both cotton and soybean farmers and more than $2 billion to rice farmers — regardless of their income or the price of their crop; (2) these five crops alone will command 93 percent of the $26.2 billion in direct payments; (3) the top 10 percent of direct-payment recipients will pocket 60 percent of the subsidies, and "the top 1 percent of beneficiaries (15,200 of them) will collect over $3.3 billion, or a five-year total of $220,500 apiece"; (5) "taxpayers will be sending millions of dollars to some of the largest, wealthiest farming operations in America," EWG reports, including more than 250 farm businesses that would each collect at least $1 million over the next five years — even if the price of their crop, such as corn, remained at record levels; (6) seven states will collect half the money, and the 19 states represented on the Senate Agriculture Committee will grab more than 60 percent of the taxpayer subsidies. Unless radically modified, this farm bill cries out for a presidential veto.

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