Wheat groups says overseas subsidies costing U.S. farmers $1 billion per year
September 14, 2015 |07:49 PM
From left, Brent Blankenship, chairman of the National Association of Wheat Growers; Jason Scott, vice chairman of U.S. Wheat Associates; Dermot Hayes of Iowa State University, and Craig Thorn of DTB Associates discussed wheat subsidies in advanced developing countries with reporters in the offices of the National Association of Wheat Growers. (Jerry Hagstrom/The Hagstrom Report)
Farm subsidies in the advanced developing countries of China, India, Turkey and Brazil are costing U.S. wheat farmers $1 billion per year in lost exports and lower prices, according to a study released today by U.S. Wheat Associates and the National Association of Wheat Growers.
Leaders of the two wheat groups believe these countries are violating their World Trade Organization obligations and may ask the government to take some kind of action against them, but are waiting until more people learn about their study and the Trans Pacific Partnership negotiations and the direction of the Doha round of negotiations are clear, Alan Tracy, president of U.S. Wheat Associates said at a press briefing.
“USTR has been focused on the TPP, and the WTO Doha round agenda,” Tracy said. “It is possible those things will come to a conclusion soon.”
The United States has not filed any agricultural trade cases in the last few years, he added.
“Since these subsidies are the acts of sovereign governments, our farmers cannot battle them alone,” Tracy said. “We are working with USTR and USDA to determine our next steps, including a possible WTO challenge.”
But Tracy also noted that in discussions of how to conclude the long-stalled Doha round, U.S. Ambassador to the WTO Michael Punke has used the work that the wheat groups have done to point out that these countries are subsidizing agriculture in a way that is causing market distortions.
“Today, it is the farm subsidies in a few advanced developing countries, not developed country policies, which disrupt normal trade flows and distort world wheat prices,” Tracy said.
“These rapidly growing subsidies cause direct, serious and now measurable impacts on the prices that U.S. farmers receive for their grain.”
At today’s press briefing, the groups released a study by Iowa State University economist Dermot Hayes that was undertaken to determine what would happen to U.S. and global wheat production, trade and prices if domestic support in China, India, Turkey and Brazil were removed.
Hayes and his colleagues applied the price support and input subsidy data identified in a November 2014 study by DTB Associates.
Results showed that if all support were removed from all four countries, annual U.S. wheat production would increase by more than 53 million bushels, farm gate prices would increase by nearly 30 cents per bushel and U.S. wheat farmers would receive $947 million more in annual revenue, the study said.
The study also indicated that with such changes, wheat trade flows would shift and the four countries would increase net imports by nearly 10 million metric tons.
Hayes said the model estimated the United States would capture more than 20 percent of such an increase to export an additional 2.2 million metric tons compared to the model’s baseline if there were no changes in domestic support in those countries.
“We have had a decline in net farm income,” said Jason Scott, a wheat farmer who is vice chairman of U.S. Wheat Associates, the export promotion group. “If these policies we reformed, U.S. wheat producers would see a 10 percent increase in exports.”
The wheat leaders said they hope that the study released today shows USTR and Agriculture Department leaders how the advanced developing country subsidies affect American farmers.
Craig Thorn of DTB Associates said the domestic and export subsidies used by the advanced developing countries send bigger signals to farmers about planting decisions than the U.S. subsidy programs under the 2014 farm bill, which are based on historic yields and base acres.
“You cannot increase your receipts from government programs by increasing your production” under the new U.S. programs, Thorn said.
Brent Blakenship, a Pacific Northwest wheat grower who chairs NAWG, said the usual assumption is that the United States exports 50 percent of its wheat, but that in the Pacific Northwest the percentage exported can be as high as 85 to 90 percent, which means that the decrease in income from loss export sales is even greater.
Referring to current negotiations in the Doha round, Blankenship added, “It is totally unacceptable to tolerate demands from countries who are in violation of their WTO commitments, who continue with these huge levels of support while demanding concessions from the United States. The American wheat farmer will not give away any more.”
Blankenship noted that U.S. wheat acreage has fallen from 90 million acres in the early 1990s to 56 million acres.
Asked by The Hagstrom Report what role these foreign subsidies played compared to other issues such as competition from other crops such as corn and soybeans and decreased demand due to concerns about gluten, Blankenship said he could not provide percentages.
But Tracy said that the subsidies in the advanced developing countries are definitely the biggest factor in decreased trade.
Asked whether the countries have increased their wheat subsidies so that they will be more self-sufficient and not dependent on the international markets in which prices spiked in 2008, Hayes acknowledged that the countries do want to be “self sufficient” and engage in “food security.”
But Thorn noted that during the same years since 2008 the advanced developing countries have “become increasingly prosperous,” even if they are experiencing some economic difficulties this year.
Subsidizing agriculture is of the ways the countries have used their increased wealth, Thorn said.
“They are not feeling the weight of their WTO obligations the way they should,” he added.
The United States negotiated disciplines on agricultural subsidies years ago, Thorn noted, adding that the question is now “Are they going to be enforced?”
