By Brian Doidge, Market Analyst, Ridgetown College, University of Guelph

U.S. & World
On September 10, the U.S. Senate passed an emergency farm aid package worth US$5.9 billion in response to drought in the U.S. mid-west. If actually enacted, this would be the sixth emergency aid payment in the last 4 years. The bill must still pass the House, go through reconciliation if there are differences between the Senate and House versions, and then be signed by President Bush. Any aid is far from certain, especially since the Administration has repeated its opposition to any more emergency aid packages for agriculture on numerous occasions. Their argument is that the new U.S. Farm Bill, signed only 4 months ago, was greatly enhanced in order to end the need for such emergency payments.

But politics rules all. The reason the Senate passed the bill didn’t have much to do with drought, or farmers, or even agriculture; it had everything to do with political reality. The Democrats control the Senate by 1 seat and are vulnerable in 12 mid-western Senate seats in upcoming mid-term elections this November. They first passed a ‘cloture’ motion, preventing amendments and declaring the bill exempt from Congressional budget rules which require offsetting cuts in other funding in order to finance new spending. Because the bill authorizes an ‘emergency’ payment, no offsets are required. This boxed Republicans in politically. If they voted against the bill, Democrats would have ammunition (i.e., “Republicans voted against aid to drought-stricken family farmers in the heartland of the U.S.”) going into critical mid-western Senate elections less than two months away. If Republicans voted for the bill, Democrats would box President Bush in politically. Assuming the House approved the bill (which is far from a certainty because the House is far more urban-oriented – representation by population rather than two seats per state regardless of population as in the Senate), President Bush would either have to sign or veto. A veto by a Republican President would again hand Democrats a significant political weapon less than two months before elections. Mr. Bush signing a Democrat-sponsored emergency aid bill would earn them political points with ag voters in the mid-west. Either way, the Democrats think they win.

The message for us? There are two: a) more emergency payments would only further tilt the playing field against Ontario grain and oilseed producers; b) regardless of your appetite for support payments to agriculture, it is important to recognize that U.S. agriculture has a far better opportunity to have its voice heard in the U.S. political system than our agriculture industry has here. The secret is that there are only two Senators per state. This means that every Senator has farmers as constituents, and that farmers have an inordinate voice in the Senate relative to their actual percentage of the population or economy.

This week, the European Union released its preliminary list of $4 billion worth of imports from the U.S. to be targeted should the U.S. not comply with the recent W.T.O. ruling that found the U.S. unfairly subsidizes and supports its exporting companies. Significant on the list is imports of cereal grains (including corn) and corn gluten feeds. Such restrictions would weaken corn product prices in the U.S. and sap strength in Chicago corn pricing. The U.S. has until later in the fall to respond and make W.T.O. reforms as required. Stay tuned.

In other news south of the border, the USDA released its September Supply & Demand report. National average yield was actually increased to 125.4 bu/acre from 125.2, but harvested acreage was reduced thanks to the ravages of drought. The net result was that the overall crop estimate was reduced by 38 million bushels to 8.849 billion, slightly higher than pre-report guesses. Carryout dropped by the identical 38 million to 729 million. Average price was increased a nickel to US$2.55/bushel.

Ontario
Of interest to us in the USDA reports is that the average yield in Michigan was increased by 9 bu/acre to about 117 bu/acre. This is counter to what we perceive in Ontario, where we have once again reduced our provincial average yield guess down to 106 bu/acre from 111. If correct, this will reduce the total crop down to just under 200 million bushels. This would mean that imports of U.S. corn would have to increase from previous guesses. The improved Michigan crop would be the source of supply.