3 August 2001

Bush turns mean on

farm bailout payments

George W Bush may only have been president for a few

months, but hes already upset many of his farm supporters

by offering only $5.5bn in farm support rather than the

$10bn hoped for, explains Alan Guebert

THE long hot summer of American farm politics arrived right on schedule on June 20 when a key Congressional agriculture committee voted to give US farmers another $5.5bn (£3.9bn) "supplemental" payment. It is the fourth such supplement in four years under Freedom to Farm.

But the vote opened more wounds than it bandaged and increased the chances of more bloodletting in the autumn when both the US Senate and House farm committees

compete to write 2002 farm

legislation to replace Freedom to Farm.

The June 20 battle, won by rookie president George W Bush in a 24 to 23 House Ag Committee vote, highlights the developing split between the White House and his farm supporters. Bush had warned the Committee, led by fellow Texan and fellow Republican Larry Combest, not to spend more than $5.5bn. But Combest, in a break with Bush, called for more money and then voted against the President.

Bush put his ag supporters in a tight box earlier by securing

passage of the massive $1.3 trillion (£925bn) tax cut. That whopper, now law, leaves Congress will little money for new problems. Thus the White Houses stingy 2001 farm bail-out. Farm groups were

seeking $10bn (£7.1bn).

Farmers, who overwhelmingly voted for Bush, bit their stiff lips over the White Houses penny-pinching because the bailout barely covers the expected $3.6bn (£2.6bn) rise in farm production costs this year and does not address weak farm income.

But more importantly for Bush, the meagre bonus package is already

costing him Congressional farm

support in an even bigger upcoming legislative battle – free trade

authority. The President, who hopes to change the spots on this cow by calling it Trade Promotion Authority rather than its more common Fast Track, has labelled the vote

"the most important agricultural

vote this year."

And that from someone not known for his command of the Kings English.

Not only has Bush ratcheted up the rhetoric, but he also put on his showmans coat and held a glossy White House reception to sell Fast Track to farm leaders. The farmers, fresh from the fields and duly impressed with the lavish Presidential attention, delivered for Bush: all came from the meeting mouthing pleasantries about free trade.

Well, not all. In a June 27 press conference, the American Corn Growers Association (ACGA) and the National Family Farm Coalition, two smaller farm groups, released a report that shows what little benefit "more free trade" holds for American farmers.

For example, ACGA examined free trades impact on maize prices through five-year periods beginning with 1975. According to the

analysis, the US exported 48.2m tonnes of maize a year from 1975 to 1979 at an average price of $90 (£64)/t. From 1995 to 2000, with even freer trade and Freedom to Farm, US farmers exported an average – surprise, surprise – of 48.2m tonnes a year at just $75 (£53)/t.

But the story, continued ACGA, is more than just flat exports and lower prices. If inflation is

accounted for across those years, the late 1970s price of $90 (£64)/t is the equivalent of $232 (£165)/t today. In purchasing power, argues ACGA, maize prices are $157 (£112)/t less today than 20 years ago despite all the free trade talk and action.

President Bush may brush aside these comments, however he

cannot brush aside Congress and its ag committees. House ag leader Combest – again, a Bush Republican and a fellow Texan – sent a letter on June 26 to secretary of agriculture Ann Veneman

rebuking her for choosing to put the $10.4bn (£7.4bn) 1998 US farm bail-out in the "amber box" of the World Trade Organisation.

That move, which labels the

bail-out as trade-distortive, wrote Combest, "unilaterally eroded (American) farmers footing in world trade."

It also motivated Combest to

withdraw his support for Bushs Fast Track trade authority, a

stunning defection given Combests ties to the president and his

leadership on the pivotal

House Ag Committee.

Amid all the political manoeuvering, USDA released its first estimate of 2001 US crop acreages on June 30. It held a mild surprise: Maize plantings, at 30.8m hectares (76.1m acres), are down 4% from a year ago.

But soyabean plantings, at 30.5m ha (75.4m acres), and 2001 wheat plantings, at 24m hectares (59.6m acres), were in line with expectations.

Given those numbers, few market analysts see little price excitement this summer unless weather – specifically, drought – delivers smaller crops. If the current good weather holds, they say maize prices will remain under $80 (£57)/t, soyabean prices less than $165 (£117)/t and wheat prices, well, wheat prices will remain in their less-than-golden $85 (£60)/t grave.

That outlook only adds to the pressure for Congress to add to its relatively tiny $5.5bn (£3.9bn) farm bailout this year. In turn, that pressure will add to George W Bushs woes in passing not just Fast Track but any legislation affecting farmers.