agriculture

ConocoPhillips to pay USD 159 million for north China oil spill

by on January 26, 2012

menafn.com…

(MENAFN – Kuwait News Agency (KUNA)) China National Offshore Oil Corp. (CNOOC) has reached an agreement with ConocoPhillips China and the Ministry of Agriculture to settle compensation claims …

See original here:
ConocoPhillips to pay USD 159 million for north China oil spill

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Tagged as: , , , , , , ,

{ 0 comments }

In Uncertain Job Market, Farming Luring More Young People

by AP on December 21, 2011

Huffington Post…

MILWAUKEE — A Wisconsin factory worker worried about layoffs became a dairy farmer. An employee at a Minnesota nonprofit found an escape from her cubicle by buying a vegetable farm. A nuclear engineer tired of office bureaucracy decided to get into cattle ranching in Texas. While fresh demographic information on U.S. farmers won’t be available until after the next agricultural census is done next year, there are signs more people in their 20s and 30s are going into farming: Enrollment in university agriculture programs has increased, as has interest in farmer-training programs. Young people are turning up at farmers markets and are blogging, tweeting and promoting their agricultural endeavors through other social media. The young entrepreneurs typically cite two reasons for going into farming: Many find the corporate world stifling and see no point in sticking it out when there’s little job security; and demand for locally grown and organic foods has been strong enough that even in the downturn they feel confident they can sell their products. Laura Frerichs, 31, of Hutchinson, Minn., discovered her passion for farming about a year after she graduated from college with an anthropology degree. She planned to work in economic development in Latin America and thought she ought to get some experience working on a farm. She did stints on five farms, mostly vegetable farms, and fell in love with the work. Frerichs and her husband now have their own organic farm, and while she doesn’t expect it to make them rich, she’s confident they’ll be able to earn a living. “There’s just this growing consciousness around locally grown foods, around organic foods,” she said. “Where we are in the Twin Cities there’s been great demand for that.” Farming is inherently risky: Drought, flooding, wind and other weather extremes can all destroy a year’s work. And with farmland averaging $2,140 per acre across the U.S. but two to four times that much in the Midwest and California, the start-up costs can be daunting. Still, agriculture fared better than many parts of the economy during the recession, and the U.S. Department of Agriculture predicts record profits for farmers as a whole this year. “People are looking at farm income, especially the increase in asset values, and seeing a really positive story about our economy,” said USDA senior economist Mary Clare Ahearn, citing preliminary statistics. “Young people are viewing agriculture as a great opportunity and saying they want to be a part of it.” That’s welcome news to the government. More than 60 percent of farmers are over the age of 55, and without young farmers to replace them when they retire the nation’s food supply would depend on fewer and fewer people. “We’d be vulnerable to local economic disruptions, tariffs, attacks on the food supply, really, any disaster you can think of,” said Poppy Davis, who coordinates the USDA’s programs for beginning farmers and ranchers. Agriculture Secretary Tom Vilsack has called for 100,000 new farmers within the next few years, and Congress has responded with proposals that would provide young farmers with improved access to USDA support and loan programs. One beginning farmer is Gabrielle Rojas, 34, from the central Wisconsin town of Hewitt. As a rebellious teen all she wanted to do was leave her family’s farm and find a career that didn’t involve cows. But she changed her mind after spending years in dead-end jobs in a factory and restaurant. “In those jobs I’m just a number, just a time-clock number,” Rojas said. “But now I’m doing what I love to do. If I’m having a rough day or I’m a little sad because the sun’s not shining or my tractor’s broken, I can always go out and be by the cattle. That always makes me feel better.” Rojas got help in changing careers from an apprenticeship program paid for by the USDA, which began giving money in 2009 to universities and nonprofit groups that help train beginning farmers. The grants helped train about 5,000 people the first year. This year, the USDA estimates more than twice as many benefited. One of the groups that received a grant is Midwest Organic and Sustainable Education Service, or MOSES. The Spring Valley, Wis., chapter teaches farming entrepreneurs how to cope with price swings and what to do in cases of catastrophic weather. MOSES also organizes field days, where would-be farmers tour the operations of successful farms to learn and share tips. Attendance is up 20 percent this year, director Faye Jones said, and some outings that used to attract 30 or 40 people have drawn as many as 100, most between the ages of 18 and 30. “I think for many people, farming has been a lifelong dream, and now the timing is right,” she said. Among the reasons she cited: the lifestyle, working in the fresh air and being one’s own boss. If farming is beginning to sound like an appealing career, there are downsides. The work involves tough physical labor, and vacations create problems when there are crops to be harvested and cows to be milked. In addition, many farmers need second jobs to get health insurance or make ends meet. As the USDA notes, three-fifths of farms have sales of less than $10,000 a year, although some may be growing fruit trees or other crops that take a few years to develop. None of those factors dissuaded 27-year-old Paul Mews. He left a high-paying job as a nuclear engineer last year to become a cattle rancher in Menard, Texas. His wife’s family has been ranching for generations, and Mews decided he’d much rather join his in-laws and be his own boss than continue shuffling paperwork at the plant. “When you’re self-employed it’s so much more fulfilling. You get paid what you’re worth,” he said. “It’s really nice that what you put into it is what you’re going to get back out.” ___ Dinesh Ramde can be reached at dramde(at)ap.org.

Go here to read the rest:
In Uncertain Job Market, Farming Luring More Young People

Find our Weekly Commercial Real Estate, Private Equity and Fund Newsletters at www.WeeklyBrief.net

Tagged as: , , , , , , ,

{ 0 comments }

Germany, France Push For Power To Reject Eurozone Budgets

November 28, 2011

Germany and France stepped up a drive on Monday for intrusive powers to reject national budgets in the euro zone that breach EU rules, as a market rout of European debt eased temporarily on hopes of outside help for Italy and Spain. The OECD rich nations’ economic think-tank said the European Central Bank should cut interest rates and step up its purchases of government bonds to restore confidence in the euro zone, which it said now posed the main risk to the world economy. In Brussels, finance ministers of the 17-nation currency area meeting on Tuesday are due to approve detailed arrangements for scaling up the European Financial Stability Facility rescue fund to help prevent contagion spreading in bond markets, and to release a vital aid lifeline for Greece. Berlin and Paris aim to outline proposals for a fiscal union before a European Union summit on December 9 increasingly seen by investors as possibly the last chance to avert a breakdown of the single currency area. “We are working intensively for the creation of a Stability Union,” the German Finance Ministry said in a statement. “That is what we want to secure through treaty changes, in which we propose that the budgets of member states must observe debt limits.” It also dismissed a report by the newspaper Die Welt that Germany and the five other euro zone states with top-notch AAA credit ratings could issue joint bonds. Finance Minister Wolfgang Schaeuble acknowledged on Sunday that it may not be possible to get all 27 EU member states to back treaty amendments, saying agreement should be reached among the 17 euro zone members. “That can be done very quickly,” he told ARD television, adding that it only required changing an additional protocol to the EU’s Lisbon Treaty. “END OF THE EURO?” In France, Agriculture Minister Bruno Le Maire said euro zone countries would have to give up some budget sovereignty to save the euro from hostile “speculators.” “We won’t be able to save the euro if we don’t accept that national budgets will have to be a bit more controlled than in the past,” Le Maire told Europe 1 radio. “We are in an economic war with a number of powerful speculators who have decided that the end of the euro is in their interest,” he said. Handing over fiscal sovereignty to the executive European Commission is politically sensitive in France, which has a strong Gaullist, nationalist tradition. President Nicolas Sarkozy’s office sought to quash a weekend newspaper report that Berlin and Paris were planning to confer “supranational powers” on Brussels, suggesting such intrusion would only apply to countries such as Greece that were under EU/IMF bailout programs. But Le Maire, asked whether the Commission would be granted more powers over national budgets in the euro zone, said: “Why not? The French people have to realize what is at stake — the preservation of our common currency and our sovereignty. “We’ll see if it’s the council (of ministers) or some other European institution (that exercises these powers). What matters is that we ensure that budget discipline is respected within the euro zone. Otherwise the euro itself is threatened.” He acknowledged that France and Germany were still at odds over greater ECB intervention to rescue the euro but said: “We will have to find a compromise.” On financial markets, the euro regained ground after slipping below $1.33 in Asia. Italian, Spanish, French and Belgian bond yields fell, as did the cost of insuring those countries’ debt against default. But relief may be short-lived as the rally was partly due to an Italian newspaper report that the International Monetary Fund was in talks to lend Italy up to 600 billion euros — more than its entire available war chest — which the IMF denied. “There are no discussions with the Italian authorities on a program for IMF financing,” a spokesperson for the global lender said. The European Commission also said Italy had not asked for any amount of money and there were no discussions at European level on aid for Rome. IMF inspectors are due in Rome this week to study Italy’s public finances after former Prime Minister Silvio Berlusconi agreed earlier this month to submit to regular monitoring of his promised austerity measures and economic reforms. IMF TO THE RESCUE? EU officials say some sort of IMF program could make sense for both Italy and Spain as part of a multi-pronged response involving the ECB and the euro zone rescue fund to implement reforms and restore market confidence in their debt. A senior EU source confirmed that both Berlusconi and the European authorities had rejected an IMF offer of a 50 billion euro precautionary credit line for Italy in talks on the sidelines of the Cannes G20 summit on Nov 3. The source said the sum would have been insufficient to convince markets. Reuters reported exclusively last week that Spain’s People’s party, due to form a new government by mid-December, is considering applying for IMF aid as one option for shoring up public finances. [ID:nL5E7MP2R0] In its world economic outlook, the Organization for Economic Cooperation and Development forecast growth in the euro area will slow — under a baseline scenario of “muddling through” — to 0.2 percent in 2012 from an estimated 1.6 percent in 2011. The bloc’s economy will then expand by 1.4 percent in 2013. With unemployment set to rise and inflation to fall, the OECD said the choice for the ECB was clear. “This calls for … a substantial relaxation of monetary conditions,” the OECD said. Banks would need to be well capitalized and policies put in place for sovereigns to finance themselves at reasonable rates. “This calls for rapid, credible and substantial increases in the capacity of the EFSF together with, or including, greater use of the ECB balance sheet,” the OECD said. OECD chief economist Pier Carlo Padoan said current plans to leverage the euro zone bailout fund were insufficient. “The numbers we have seen floating around are not enough,” Padoan told a news conference, adding that what was needed was a multiple of what was currently on the table. Euro zone leaders initially planned to leverage the EFSF up to 1 trillion euros, but the fund’s head has said it is now unlikely to achieve that. The fund has had trouble selling its own bonds to raise funds and has yet to attract the pledges it hoped to get from countries with sovereign wealth to invest. (Additional reporting by Leigh Thomas in Paris and Emelia Sithole-Matarise in London; writing by Paul Taylor; editing by Philippa Fletcher) Copyright 2011 Thomson Reuters. Click for Restrictions .

Read the full article →

How Banks Cause World Hunger [GRAPHIC]

September 14, 2011

Banks are among some of the most hated companies in America , largely for their role in causing a global financial crisis. That reputation could only get worse thanks to one of their more controversial practices: Food Speculation. Banks and other financial speculators are increasingly “betting on food prices in financial markets,” according to this infographic from the World Development Movement . Food prices now account for 70 percent of total expenses in some of the world’s poorer households, hitting a record high in February . Looking forward, the OECD estimates that over the next decade cereal prices will rise 20 percent. That’s still less than meet prices, which are expected to jump by nearly a third . Here is the infographic from the World Development Movement :

Read the full article →

The Agriculture Industry’s Dirty Little Secret

June 4, 2011

WASHINGTON — The agriculture industry fears a disaster is on the horizon if the one bit of new immigration policy that Congress seems to agree on becomes law. A plan to require all American businesses to run their employees through E-Verify, a program that confirms each is legally entitled to work in the U.S., could wreak havoc on an industry where 80 percent of the field workers are illegal immigrants. So could the increased paperwork audits already under way by the Obama administration. “We are headed toward a train wreck,” said Rep. Zoe Lofgren, a California Democrat whose district includes agriculture-rich areas. “The stepped up (workplace) enforcement has brought this to a head.” Lofgren said farmers are worried that their work force is about to disappear. They say they want to hire legal workers and U.S. citizens, but that it’s nearly impossible, given the relatively low wages and back-breaking work. Wages can range from minimum wage to more than $20 an hour. But workers often are paid by the piece; the faster they work, they more they make. A steady income lasts only as long as the planting and harvesting seasons, which can be measured in weeks. “Few citizens express interest, in large part because this is hard, tough work,” Agriculture Secretary Tom Vilsak said this past week. “Our broken immigration system offers little hope for producers to do the right thing.” Arturo S. Rodriguez, president of United Farm Workers, said migrant farm workers are exposed to blistering heat with little or no shade and few water breaks. It’s skilled work, he said, requiring produce pickers to be exact and quick. While the best mushroom pickers can earn about $35,000 to $40,000 a year for piece work, there’s little chance for a good living and American workers don’t seem interested in farm jobs. “It is extremely difficult, hard, dangerous work,” Rodriguez said. Last year Rodriguez’s group started the “Take Our Jobs” campaign to entice American workers to take the fields. He said of about 86,000 inquiries the group got about the offer, only 11 workers took jobs. “That really was thought up by farm workers trying to figure out what is it we needed to do to show that we are not trying to take away anyone’s job,” Rodriguez said. Vilsak and the American Farm Bureau Federation president, Bob Stallman, said in a recent conference call with reporters that the best and likely only hope to stave off an economic catastrophe for American farmers and consumers is comprehensive overhaul of immigration policy. Vilsak said the industry is worth about $5 billion to $9 billion a year. “We need to address the agriculture labor supply,” Stallman said. “This situation will affect the future of America’s farmers and ranchers.” Manuel Cunha, president of Nisei Farmers League, a group representing growers in central California, said farmers don’t have the wherewithal to verify a worker’s status when their labor force is often hired on the spot and in a hurry to pick ripe crops. Forcing them to verify a worker’s legal status, he said, would prove disastrous. “If we were to use E-Verify now, we’d shut down, either that or farmers would go to prison,” said Cunha, a Fresno-based citrus farmer. “We’ve admitted many workers are not legal and if you have to get rid of everybody, where do I go to get my labor? Nowhere. We have to have a work force that we can put in the system.” Shawn Coburn, a politically active farmer who grows thousands of acres of almonds on the west side Fresno County, said he favors tighter borders, a guest worker program and a path to citizenship for those already in the U.S., or at the very least their children. But, like Cunha, he believes a mandatory E-Verify plan would be nothing but trouble for the industry. “I don’t think it’s going to happen, but if it does it would throw the California economy for a loop,” Coburn said. Without a broad overhaul in the works, industry officials have focused on improving the H-2A temporary agricultural workers visa program that’s aimed at allowing season workers to come and work on U.S. farms. The program, however, is costly, time consuming and inefficient, according to Cathleen Enright, vice president of federal government affairs for the Western Growers Association. “It has never been a great program or easy to work with,” Enright said. “It’s an unbelievably crushing program.” There isn’t enough capacity in the system to process, interview and approve visa applications for the nearly 1 million seasonal workers who take to the fields every season. Farmers are required to pay for a worker’s transportation from their home country to the fields, provide housing and other benefits. Even minor violations of the numerous rules and regulations that govern the H-2A program can lead to hefty fines, Enright said. “It’s too expensive, it’s too litigious, it’s too bureaucratic,” said Lee Wicker, deputy director of the North Carolina Growers Association. “We need a program that farmers can use and have confidence in.” Rep. Trey Gowdy, R-S.C., said farmers in his area want to do the right thing and hire legal workers but they are frustrated with the stifling bureaucracy that comes with the visa program. “It’s a labyrinthine visa process, with the slow walking of applications,” Gowdy said. “You could not by accident come up with a better plan to ruin the small family farm.” Farmers, he said, “are just at their wits’ end.” Using the program to get workers can put farmers at a disadvantage if their competitors decide to take their chances and hire illegal workers, Wicker said. Lawmakers agree the visa program is problematic, but there’s a wide divide on how to make it workable. In 2009, Rep. Howard Berman, D-Calif., and Sen. Dianne Feinstein, D-Calif., introduced legislation that would have given temporary resident status to immigrant farm workers and have created a path to legal residency for those workers after five years. Neither bill, known as the AgJOBS Act, made it out committee. The idea is part of the discussion involving changes to the seasonal workers visa program, but Republicans have pledged to block it because it includes a path to legal status for immigrant workers. Rep. Dan Lungren, a California Republican from an agriculture industry-heavy district near Sacramento, has said he sees that same “train wreck” Lofgren described, but that the AgJOBS bill isn’t the answer. “We’re going to have a crisis in agriculture,” Lungren said during a hearing this year on the visa program by the House Judiciary subcommittee on immigration policy and enforcement. “And while it sounds great to say an agreement (on AgJOBS) is going to take care of it, it’s not going to pass.” About the only hope for success for any immigration-related legislation, Lungren and others say, is a bill that would make it mandatory for American employers to use the government’s E-Verify program to ensure their workers are legal. GOP Rep. Lamar Smith of Texas, chairman of the House Judiciary Committee, has pledged to introduce such legislation. Such a proposal appeared to get a push this past week when the Supreme Court ruled 5-3 in favor of an Arizona law that allows the state to penalize businesses for hiring illegal immigrant workers. Agriculture officials say there needs to be some exception for farm workers. “It needs to take into account the unique aspects of agriculture,” Vilsak said. ___ Associated Press writers Gosia Wozniacka and Tracie Cone in Fresno, Calif., contributed to this report. ___ Array ___ Online: Array Array Array Array

Read the full article →

Steve Ressler: The Myth of "Rightsizing" the Federal Workforce

June 3, 2011

Guest Post by Alicia Mazzara President Ronald Reagan was no fan of big government. But would the man who famously said, “As government expands, liberty contracts,” agree with the latest efforts to contract the federal government? One week ago, the House Subcommittee on the Federal Workforce met to discuss “rightsizing” the federal government. So just what is “rightsizing”? It’s a politically correct way of saying cutting people’s jobs. In other words, rightsizing is the new downsizing. While the House debates how many federal jobs are needed to keep the country running, government agencies are taking steps of their own to save on labor. Earlier this month, the Department of Agriculture became the first cabinet-level agency to offer “buyouts” that encourage employees in certain positions to retire early . Smaller agencies, including the U.S. Postal Service, Federal Trade Commission, and Air Force Material Command, also began offering buyouts earlier this year. We are living in austere budgetary times, and government has a reputation for being bloated and inefficient. No one, not even the average federal worker , disagrees that we need to do more with less. However, it’s exceptionally difficult to figure out what the “right” size is. Moreover, shrinking the federal workforce often means increasing the number of contractors, which does not translate into cost savings. This past week, federal workers have been mulling the following Washington Post article by Joe Davidson. Davidson highlights the following statistic: There are currently 2.1 million federal workers and approximately 10.5 million government contractors and grantees. This growing imbalance is a big deal considering that contractors are usually costlier than federal employees: Carol Davison, a Human Resources Specialist at the Department of Commerce, explains : [R]eplacing Feds with contractors is not more effective or efficient because government employees do the same work for less money. Additionally, they are the subject matter experts on programs under analysis and should perform it because they will be responsible for providing the service. In fiscal year 2010, the federal government spent $537.5 billion dollars on contracts. In other words, rightsizing is starting to look like we’re just robbing Peter to pay Paul. Carol also raises a second important point: federal workers have specialized knowledge that a contractor may not have. By cutting federal jobs or encouraging federal workers to retire early, government runs the risk of losing critical institutional knowledge. Learning takes time, and the benefits of this knowledge are often difficult to quantify. Moreover, trading federal workers for contractors doesn’t really shrink government or our costs. The question should not be about size, but about creating well-functioning government. Federal employees have plenty of ideas on how to save the government money. Kathryn S., a Strategic Affairs Officer at the Mississippi Department of Employment Security, offered several alternatives : Streamlining processes, eliminating deadwood employees, crafting retirement options, combining (truly) duplication programs would all reduce costs. Applying the same models to the sacred cows of security and defense would also reduce costs. None of these options are being explored. Anita Arile, a Management Analyst for the government of Guam, brought up the role of technology: Today’s government must find balance between technological resources and human resources. Although technology can replace several human resources, it is the agency’s responsibility to ensure that the human resource available are knowledgeable and capable of continuing the processing flow manually. Through technology, many agencies are capable of minimizing paperwork by sharing common data. This has proven to benefit both the public and the employees of several California health care agencies. As Davidson points out, the question of workforce size depends on the task at hand. Ultimately, any conversation about “rightsizing” must address the intended role of federal government. You can’t figure out how many people are right for the job if you don’t know what it is. But most importantly, it is not really “rightsizing” if we are simply swapping out federal workers for more expensive contractors. To say that we can fix government simply by reducing its size is an oversimplification. As President Obama said in his commencement speech at the University of Michigan: “What we should be asking is not whether we need ‘big government’ or a ‘small government,’ but how we can create a smarter and better government.” Alicia Mazzara is a Graduate Fellow at GovLoop and is currently pursuing her master in public policy at the George Washington University. In a past life, Alicia worked in consumer protection at the Federal Trade Commission.

Read the full article →

Gemma Godfrey: Russian Investment Opportunities: The Drivers and the Hidden Gems

May 31, 2011

From the world’s best performing index in the first three months of this year, to a laggard this quarter, the Russian index has offered dramatic returns as well as downside risk. What has driven investor sentiment and what are many investors missing? The World Leader Slips to World Laggard Russia’s RTS Index was the world’s best performing index in the first three months of this year but has now fallen by around 11% in value so far this quarter (Source: Bloomberg). Moves in this market are often attributed to sentiment over the oil price due to the significant revenues generated by the country exporting this commodity. Therefore speculation over economic growth (read: oil demand) is highly influential. This year has been no different. Turmoil in the Middle East can be attributed as one of the main drivers of a strong rally in oil in the first quarter and concerns over economic growth has caused a reversal since that time. However, is this too simplistic a view and aren’t there other factors to which an investor in Russia should be paying attention? Beyond Oil It is clear to see why investors place so much emphasis on the oil price as a dictator of Russia’s financial health. Supplying some 11.4% of the world’s oil supply last year, Russia is the ” biggest single source outside the OPEC cartel .” Although official figures calculate its contribution to Russia’s GDP at 9% , it is important to be aware that speculation over tax avoidance suggests the value may be nearer to 25% . Nevertheless, what is often overlooked is the specific oil price factored into their budget. For this year, a price above $75 /barrel will produce a deficit reduction. With Brent currently standing at $115 /barrel, a fall in the Russian Index in reaction to a fall in the oil price to anything above $75/barrel may be missing the point. Boosting Ties with Iraq With Russian oil fields maturing and production growth resting heavily on foreign investment , the country is looking externally for new sources. Iraq offers potential opportunities and TNK-BP , Russia’s 3rd largest oil producer and BP Plc’s 50-50 joint venture, isn’t holding back. The relationship between the two countries dates back many years and in 2008 Russia wrote off most of their $12.9bn debt mainly generated pre-gulf war from the Saddam Hussein government purchases of Soviet weapons . Interestingly, last October the Russian President, Dmitry Medvedev announced his country was ready to strengthen co-operation with Iraq, the same month TNK-BP gained the right to bid for 3 natural gas areas in the region, Mediating the Exit of Qaddafi Within the political arena, Russia has been just as active. In addition to fighting for a stronger developing market influence at the IMF, Russia has offered its services to facilitate the exit of Qaddafi from rule in Libya. This is the first time it has shown support for the NATO-led military campaign after abstaining from UN Security council vote in March which authorised the intervention and accusing NATO of violating the resolution by backing anti-Qaddafi rebels and causing civilian casualties from air raids. Due to the belief that Qaddafi has ” forfeited legitimacy “, they are willing to negotiate his fate with members of his entourage. Evidence of the country’s powerful network, the value of their political clout has been highlighted. Driving the Agriculture Market Back to commodities but from a different angle, the Russian weather is an influencer to watch for investing in the agriculture markets. Fine weather has prompted an upward revision of Russian grain production with the Federal Hydrometerological Center reporting the warmer weather has improved the prospects for crops. This has led to speculation that Russia’s ban on grain exports may be lifted on 1 July . Wheat future prices saw double digit losses. The Chinese Buyer One particular potential buyer of Russia’s resources is China, state media reported last Monday. China Investment Corp (CIC), the country’s $300bn sovereign wealth fund, was set up in 2007 to invest some of the country’s massive foreign exchange reserves. With the world’s largest foreign capital resource, at $3.0tn , they are keen to find better sources of return and commodities to fuel their rapid economic growth. G-8 Bullishness Boosting Appetite for Risk Despite these many factors which may influence Russia’s outlook, financially, economically and politically; its index continues to exhibit a strong correlation to the oil price. This week we’ve seen oil (and Russian equities) respond positively to the declaration by the Group of Eight that the global recovery is strengthening . But to differentiate between short-term over-reaction and more logical fundamental moves, being aware of all the issues will equip you with the insight to navigate this volatile but potentially profitable market.

Read the full article →

Cost Of Natural Disasters: ‘Ten Billion Dollars Would Be Conservative’

May 19, 2011

This year’s record-breaking tornadoes, floods, droughts and wildfires will cost the country tens of billions of dollars in economic losses — and these estimates are expected to climb as the Mississippi flooding and severe drought in Texas continue into the summer. Economists disagree about the precise figures — with the estimates varying by billions — but most agree that $10-15 billion in losses are conservative calculations. Severe weather in April alone — the month when record-breaking tornadoes tore through much of the Southeast and killed more than 300 people — cost the country $12 billion in economic losses, according to Steven Bowen, a meteorologist with the Impact Forecasting team of Aon Benfield, one of the world’s largest insurance brokers. The cost estimates for the flooding in Louisiana and Mississippi range from $3-9 billion, and the ongoing Texas drought, which began in November and has caused more than 10,000 wildfires across the state, has so far cost between $1.5 billion and $3 billion in crop and cattle losses. As the flooding and drought continue, government agencies say that it’s impossible to predict the long-term economic impact of the losses, which include thousands of homes and buildings destroyed by the tornadoes, casinos and ports along the Mississippi temporarily closed, millions of acres of grazing land scorched by the fires and 1 percent of the country’s cropland currently submerged in water. “It’s too early to say what effect this [the flooding] would have on the national economy,” the Department of Agriculture stated in a report on May 11. “Regardless, it probably will not be extensive given the estimated percentage of land affected.” But even as the long-term effect remains unknown, the short-term impact is clear: Individuals and small businesses are absorbing the bulk of these losses, as states, government agencies and insurance companies help foot nature’s bill. April’s tornadoes are expected to wipe thousands of mom-and-pop shops off the map. This region already had a high rate of small business failure, and before April’s disasters between 6,000 and 8,000 small businesses in Alabama, Tennessee, Mississippi and Georgia were expected to go under within the year, according to a report by Dun & Bradstreet, a research company that tracks small businesses. After the tornadoes, the number jumped to at least 10,000 shops. “Small businesses are definitely going to bear the brunt of this,” Byron Vielehr, President of Global Risk and Analytics division at Dun & Bradstreet told HuffPost in a telephone interview. The businesses won’t fail immediately, said Vielehr, but when they do it could produce a spike in unemployment and a loss of about a billion dollars in sales, just from these tornado-stricken small businesses alone. The situation of small farmers and ranchers in Texas is similar. After enduring the driest seven months on record, farmers and ranchers are being forced to abandon a cycle of wheat crop and sell off herds. Texas produces 20 percent of the country’s beef, and cattle ranchers are being slammed by the combination of scorched land unable to support grazing, and high feed and hay prices, both of which were driven up by the drought and the fires. “For a rancher, at this point he’s going to be losing about 30 percent of the income he would have averaged in the past,” said Bill Hymen, executive director of the Independent Cattlemen’s Association, the second-largest coalition of ranchers in the state. “And that’s not just this year but going forward because of dwindling seed stock,” he added, referring to the process of fewer cows leading to the birth of fewer calves in the future. As is the case in all industries, when a rancher has less pocket money, that creates a ripple effect in the local economy — with Hymen noting that ranchers, who know it’s likely that the drought will continue through the summer, are buying less and will ultimately pay less in taxes next year. Along the Mississippi and Atchafalaya rivers, a portion of small businesses and farms will likely follow the same course as the businesses that fell in the tornadoes path. Closed ports and casinos, too, are losing millions of dollars each day in lost river traffic, trade and gambling. Closing the Mississippi river itself causes even more economic damage. On Tuesday, the Coast Guard closed a 15-mile stretch of the Mississippi upriver of New Orleans by Natchez Port, a decision which could lead to losses of hundreds of millions of dollars each day, said Eric M. Holthaus, researcher at the International Research Institute for Climate and Society. The Coast Guard said that this closure is expected to last only a few days, but Holthaus also imagines a nightmare scenario in which the Port of New Orleans — the seat of our country’s agricultural exports and a handful of oil refineries — has to be closed. “I would be talking about trillions of dollars at that point,” he said. As long as the Port of New Orleans stays open, which it likely will, the Federal Emergency Management Agency, commonly known as FEMA, said that right now there is plenty of money in the $2 billion emergency fund to aid the states hit hardest by the natural disasters. FEMA has already approved about $38 million in future storm and tornado rebuilding assistance, including $9.4 million to Mississippi, $80 million to Alabama, $6.6 million to Georgia, $5.9 million for Tennessee and $16 million for Arkansas. For the flooding, FEMA has so far approved more than $11 million, including $1.4 million for Tennessee, $9 million for Missouri and $785,000 for Mississippi. As the flooding continues, the FEMA contribution is expected to rise, and these figures don’t include other public assistance that the regions will receive, either from the federal or state level. Insurance companies, too, are paying out, and April alone produced hundreds of thousands of insurance claims. Still, insurance companies and federal agencies aren’t feeling the hit of $10-15 billion in losses as acutely as individuals, towns and small businesses. “If you’re a small town in western Texas that’s lost anything, that town is going to suffer regardless of how much insurance money they get in the end. Less money in the community will mean that all unrelated jobs will take a hit,” said Holthaus, who said that the same holds true for communities affected by the tornadoes or the floods. “During a recession is a bad time for a disaster to hit,” he said.

Read the full article →

The Worst Of Consumer Inflation May Be Over

May 14, 2011

WASHINGTON — After weeks of pain at the gas pump and the grocery store, the worst appears to be over. Oil prices have fallen, with gas soon to follow. Demand for farm commodities, like the corn used in everything from cereal to soda, has dropped. And businesses remain slow to pass along higher costs because customers aren’t getting raises and might walk away. Inflation may be approaching its peak. “I think the bulk of the big price increases are over,” said Gus Faucher, an economist at Moody’s Analytics. Lower prices – or at least a break in their steady rise – will come as a big relief. Consumer prices rose 3.2 percent for the year ending in April, the most since October 2008. Higher food and gas prices drove the gains. Excluding those two categories, prices rose 0.2 percent in April. They rose 1.3 percent over the past year, below what the Federal Reserve considers healthy. Economists study this figure, known as core inflation, because food and energy prices are volatile. Some inflation can be healthy for the economy because it encourages people to spend and invest rather than sitting on their cash. More spending drives corporate growth, which makes businesses more likely to hire people. Inflation was a much bigger concern in March. Oil prices were rising steadily because of the unrest in the Middle East. Some feared gas could reach $5 a gallon, leaving Americans much less money to spend on cars, appliances and vacations. That kind of drop in spending would squeeze corporate profits, delay hiring – maybe even tip the economy back into recession. But last week, oil prices sank by the most in two and half years. Americans drive less when gas prices get high enough, and concerns about slowing energy demand sent oil prices tumbling – from $114 at the start of May to about $97 on Friday. Now the nationwide average for gas has leveled off. On Friday it was just under $4 a gallon, where it’s been for the past week. Many analysts say it could drop to $3.50 as soon as next month. The prices of milk, bread and chicken won’t fall as fast – it could take six months or longer, analysts say – but they could decline by the end of the year. That’s because the price of corn and other grains have fallen. Overseas ranchers are using less corn for feed, and U.S. farmers have planted more. Food prices had risen in March at the fastest rate in three years. Changes in grain and corn prices take longer to filter down to grocery stores than changes in oil prices do to the gas pump. That’s because grains and other commodities represent a smaller fraction of food costs in the U.S than in other countries. By contrast, oil prices are the biggest factor in the cost of gas. There was evidence in Friday’s government report on consumer prices that food inflation will slow by year’s end. Gas prices rose 3.3 percent in April, a steep rise but the smallest since November. Food costs rose 0.4 percent, half as fast as in March. Gas accounted for about half of overall inflation in April. So a decline in the price of oil should hold down the increase in consumer prices for May. Slower inflation would leave Americans with more money to spend to stimulate the economy, including keeping more of a cut in Social Security taxes that took effect in January. Economists expect the increased spending to raise overall economic growth to an annual rate of 3 percent in the second half of this year. In the first three months of this year, it was 1.8 percent. The oil price drop should bring prices down for a range of products, including chemicals, plastics, even roofing materials. Higher diesel fuels had contributed, for example, to a sharp increase in commodity costs for Procter & Gamble. In response, the company raised prices for Gillette razors, Duracell batteries and Bounty paper towels. Falling corn prices should also help. Corn is widely used as an animal feed, so when it became more expensive, meat and dairy prices went up, too. Corn is also used in sweeteners for soft drinks and snacks, so those could become less expensive. Prices of corn, wheat and other grains jumped last summer after bad weather damaged harvests in countries from Russia to Australia to Brazil. Demand for corn from producers of ethanol, a corn-based fuel, also rose. The price of a bushel of corn reached a record high of $7.76 on April 11. But supply worries have since eased. An Agriculture Department report this week predicted that U.S. corn supplies will rise later this year, based on the drop in demand overseas and the larger crop expected next year. They had earlier been forecast to fall. Demand from fast-growing developing countries such as China and India may also slow as their central banks raise interest rates to try to slow inflation. That should also slow their growth and, in turn, may cool their demand for commodities. It takes about six months for changes in commodity prices to affect consumers. Consumer food prices didn’t start to increase until January, well after commodity costs began rising last summer. Analysts also say many companies were slow to pass along those increases for fear of spooking price-sensitive shoppers. Wage growth has been weak. Average hourly pay rose an anemic 1.9 percent in the last 12 months, less than the rate of inflation. Some companies probably won’t lower prices much, if at all. Airlines, for example, lost money because of the steady rise in the price of oil. If you bought a plane ticket three months ahead of time, your flight was much more expensive for the airline when you flew than when you bought. “They will resist any pressures to reduce fares or fuel surcharges,” says independent airline analyst Robert Mann. The average price of a round-trip ticket during the first three months of this year was $341 before taxes. That was up 10 percent from the same period last year. Airlines paid 27 percent more for fuel from January through March than they did a year earlier. But there will be relief in the prices of other things. The cost of new and used cars rose in April, but some of those increases were related to temporary parts shortages caused by the earthquake and nuclear disaster in Japan. Inflation will remain a risk. Commodity prices are volatile and subject to global turmoil. As recently as last winter, economists were worried that inflation was too low. In October, the core price index had risen only 0.6 percent in a year, and the Fed expressed concern about the risk of falling prices. ___ AP Business Writers Sarah Skidmore in Portland, Ore., and Scott Mayerowitz in New York contributed to this report.

Read the full article →

Noah Hultgren: Face of a Giant Agribusiness

May 13, 2011

According to some, I am a giant agribusiness — the worst kind of factory farmer. What qualifies me for this dubious distinction? Nothing except that, based on U.S. Department of Agriculture (USDA) figures, my farm falls in the biggest six percent of U.S. farms. And these farms account for the bulk of federal farm policy support. It sounds pretty damning, which is why it is the top talking point used by opponents of farm policy looking to dismantle a system, they say, is too tilted to agribusinesses and oppresses small, family farms. But there’s a lot more to this story than a 10-second sound bite would let on. For example, the USDA considers anyone with sales of more than $1,000 to be a farm, so that six percent figure is a little misleading. The weekend grower on the side of the road selling tomatoes from her garden would be a farmer in the government’s eyes. Ditto for the young retiree trying his hand at wine-making. Ironically, my business is probably more in line with what most of us consider a farm. It is family-run. It was passed down to me from my father and grandfather. It is a full-time effort to support my wife and kids. And, in order to make it my livelihood, it has sales exceeding $500,000. Again, that figure can be spun to sound really bad, since most people don’t know the difference between revenue and profit. But remember, the $500,000 represents gross sales, not how much money the farm or farmer is making. A farmer may produce half-a-million dollars worth of goods but might have to spend just as much to grow the crop, making it a break-even proposition and sometimes a losing one. Seems odd to call these farms corporate titans, especially when you consider that the Small Business Administration classifies most businesses as “small” if their gross sales are under $7 million a year. How much profit could a “giant corporate farm” like mine hope to generate? The USDA puts profit margins in agriculture at 10 to 15 percent. So under favorable circumstances — Mother Nature cooperates, market prices are fair, oil doesn’t spike and you don’t run into any problems like equipment breaking down and needing expensive repairs — that $500,000 in sales could generate between $50,000 and $75,000 in profit a year, according to the USDA’s estimates. No corporate executive in his or her right mind would get into such a risky business with such little profit upside. That’s why 97 percent of U.S. farms are still owned by families, not by corporations like Cargill, or ADM, or Kraft. I recognize that some may construe this article as a complaint about farm profits or an attack on smaller farm operations, but that is not my intent. Farm prices are way up right now and near an all-time high — and as a result, federal spending is way down. And I know that if America is going to meet tomorrow’s food and fiber needs it will take farms of all shapes and sizes. Smaller, organic growers are part of this puzzle, as are larger, conventional operations like mine, which supply more than three-quarters of our country’s food and fiber. As Secretary of State Clinton said this weekend, “We must redouble our commitment to sustainable agriculture and food security.” She’s right. If this nation is going to keep pace with an exploding global population, and if it’s going to do it in a sustainable way, then responsible farmers of all sizes have to come together in supporting and encouraging technology and best management practices. In addition, America needs to urge the next generation to to get involved in farming, despite the low profit margins and risk, to replace aging growers who are retiring. Our farmers and ranchers are a thin green line standing between a prosperous nation and a hungry world. It’s time to refocus on holding all parts of this thin green line instead of tearing it apart with manipulated numbers and disingenuous spin.

Read the full article →

Patrick Sharma: Farm Subsidies: A Useful Sacrifice in the Budget Debate

May 12, 2011

Amid continuing debates over how to reduce the federal deficit, recent proposals to cut farm subsidies present an important opportunity to bridge partisan divides. By reforming our antiquated farm support system, Congress can exercise some much-needed fiscal discipline and give the country an agricultural policy for the 21st century. Doing so, however, will require putting the national good over the interests of a powerful few, as well as confronting some enduring myths about American farming. Farm subsidies have long been recognized as ineffective. Since being introduced to help small farmers cope with the Great Depression, the federal farm support program has devolved into a hodgepodge of price supports, direct payments, insurance programs, tax loopholes and low-interest loans that overwhelmingly benefit wealthy farmers and large agricultural businesses. According to data compiled by the Environmental Working Group and the U.S. Department of Agriculture, in recent years the largest 10 percent of American farms have received almost 75 percent of total agricultural subsidies, while a whopping two-thirds of farmers have obtained no government support at all. In addition to rewarding millionaires and agribusinesses rather than small farmers, farm subsidies have encouraged environmentally destructive agricultural practices. By promoting production in areas that would otherwise remain fallow, farm supports have led to habitat destruction and land degradation, as well as increased pesticide and fertilizer use. Subsidies have also had a devastating impact abroad: when shipped to developing nations, cheap American foodstuffs tend to glut local markets and put indigenous producers out of business. Indeed, U.S. agricultural subsidies have been a key factor in derailing the recent Doha round of international trade negotiations. In other words, farm subsidies are bad foreign and domestic policy. But because the program is relatively cheap (estimated to cost around $16 billion in 2011, according to the Congressional Budget Office) and its impacts felt indirectly, subsidies have been allowed to remain on the books. Five-year re-authorizations of the farm support program have historically been dominated by rural congressmen and the agribusiness lobby, and as a result we have a system that lacks oversight and focus. Although Congress made some important reforms in 1996, farm subsidies continue to be a drain on the nation’s coffers, diverting taxpayer dollars away from much-needed investments in education, infrastructure and other productive endeavors. Fortunately, the current preoccupation with the federal deficit has put farm subsidies on the chopping block. Eager to find savings wherever they can, members of both parties have proposed reexamining the way the nation supports agriculture. Republican Congressman Paul Ryan of Wisconsin has called for cutting direct payments to farmers by $30 billion over ten years, while Democratic Senators Dick Durbin of Illinois and Debbie Stabenow of Michigan have indicated their willingness to reform the nation’s farm support system. Importantly, these representatives all hail from agricultural states. Going forward, it is vital that Congress look to reform the farm support program in the most thoughtful way possible. At present, discussions over altering farm subsidies are focused almost entirely on curtailing direct payments to farmers, in which the government automatically pays farm owners a fixed amount of money per year regardless of whether or not their land is being cultivated. Yet direct payments represent just a fraction of total farm supports, and other subsidies, such as price supports, do more to distort the market. If Congress is truly interested in achieving budget savings and developing a modern agricultural policy, it should put all farm subsidies (including supports for ethanol) on the table. This would mean not only curtailing payments to wealthy farmers and agribusinesses but examining whether the government should be in the business of American farming in the first place. For while agriculture accounted for a significant percentage of the U.S. economy in the 1930s, today farming constitutes less than one percent of GDP, and the notion that government support helps struggling family farmers is little more than a myth. Of course, reforming the farm support program will not solve the nation’s fiscal problems. Even eliminating all agricultural subsidies would barely dent the deficit, where meaningful action will be confined to reforming taxes and entitlement spending. But the current budgetary environment does present a chance to rethink our agricultural policies and, in the process, discard a relic of the past.

Read the full article →

How China’s Growing Middle Class Is Raising Food Prices

May 11, 2011

BEIJING — Hunger was such a constant companion in Yao Qizhong’s childhood that even now, at age 40, he’ll stoop down to salvage a single clove of garlic that falls from his table at the Beijing market where he hawks fresh produce. Life is less harsh these days, but China’s fast-rising food prices have hit his family hard, making it increasingly difficult to save for his three kids’ education – Yao’s main goal. Across town, Zhong Sheng rinses a still-twitching Mandarin fish and picks the stems from a handful of greens as he expounds on his philosophy of grocery shopping. Health and safety are his top concerns, ever since the architect became a father five years ago. Cost is a secondary consideration. “You can buy cheap stuff,” says Zhong as he and his wife cooked together and the smells of soy and scallion filled their cozy kitchen, “but if it makes you sick, you’re going to end up paying more anyway in hospital fees.” The starkly contrasting fortunes of the Zhong and Yao families offer a glimpse into how soaring food prices are playing out in the developing world – home to more than three quarters of the globe’s 6.9 billion people. Prosperity and a fast-growing middle class have cultivated more sophisticated and exotic tastes. Such luxuries as blueberries, avocado, asparagus, and endive, recently unattainable to all but the wealthiest, are now widely available in China’s big cities. But rising affluence has taxed the ability of farmers to meet growing demand while the rural labor pool dwindles. The result: Rising food prices hit every level of society, not just those who can afford imported South American bananas or pricey mushrooms and herbs from China’s remote Yunnan province. People on low or fixed incomes feel the pinch most. “We don’t dare to try and eat good stuff because we can’t afford it,” says Yao, whose four grandparents starved to death during China’s 1960 famine. He was so poor growing up in rural Anhui province that his neighbors assumed he would end up a beggar on the streets. “If I go to a supermarket,” he says, “it’s a novelty, like sightseeing.” In China, farm workers have flocked by the millions to factory and service jobs in coastal cities. Luring them back to till and weed by hand is proving a tough sell. The resulting supply pinch helped send food prices up 11.7 percent in March from the year before, adding to months of steep increases. “You can’t find (farm) workers and they’re expensive, over a dollar (7 yuan) an hour,” said Liu Li, a wholesaler hawking Napa cabbage and coriander at Beijing’s Xinfadi, north China’s biggest agricultural distribution center. People in the countryside want factory work or a job in the service industry, where they’d get to stay indoors and have a warm place to sleep, said Liu. Farm work, she said, is “too dirty and too hard.” Even with sharply higher food prices, Zhong, who runs his own business and has a master’s degree from a prestigious Beijing university, can afford to be picky. Besides he sees good reason to favor more expensive organically grown and imported foods after infant formula tainted with an industrial chemical killed six children and sickened 300,000 in China in 2008. Zhong, his wife and daughter sit down to a typical dinner of steamed fish, two types of greens, mushrooms, pork, rice and sliced apples. Total cost, about 80 yuan ($12). Each month the family spends some 2,000 yuan ($307) on food – about 10 percent of their income. Yao, who left the countryside more than two decades ago, still eats like a peasant, filling up on cheap steamed buns and noodles and pinching every penny so that he can put his kids through school. For him, meat is a once-a-week treat, though he tries to make sure his children eat it more often. As a migrant laborer, Yao has been able to skirt China’s strict birth limits, having three kids instead of the two most rural families are limited to. But his migrant status means he must pay school fees himself. A recent and routine lunch for Yao and his wife and children was a bowl of simple noodles with greens. Yao’s ginger and garlic stall earns him about 2,000 yuan ($307) a month, of which about 600 yuan ($92) goes on food for his five-person family. “I need to save money but I feel like I am already scraping the bottom of the barrel,” he said. “At the same time, I know we have to feed ourselves and eat enough, otherwise our health is going to be affected.” A host of other factors are also blamed for food prices hikes in China and elsewhere in Asia, including too much money sloshing about the economy after stimulus policies that warded off the global recession, rising oil prices and shrinking land for cultivation because of pollution and encroachment by industry. The U.N. Food and Agriculture Office’s index of global prices for meat, cereals and dairy foods has surged 37 percent in the first three months of 2011. In many Asian countries, that has translated into a 10 percent increase in local food prices, which the Asian Development Bank estimates is enough to drag another 64 million people below the $1.25 a day poverty line. Yet the changes in food and work preferences aren’t all bad because they reflect the human and economic development taking place in China, said Scott Rozelle, an agricultural economist at Stanford University and an expert on China’s food markets. Rozelle says that China’s scattered and small scale farms are becoming more consolidated and mechanized, which could eventualy raise productivity, but the changes probably won’t stop food prices from rising. Economic development involves both increases in prices and incomes, he says. Higher food prices have in fact lifted lagging rural incomes. The per capita net income for rural Chinese grew faster than urban incomes last year, jumping 10 percent to 5,919 yuan ($902). Rural Chinese are “going from grinding poor to poor,” said Rozelle, describing villages he’s seen with new brick homes and gravel roads, where all the girls go to school and every family has a mobile phone. But the changes feel painful for many urban dwellers, particularly retirees, civil servants and migrants, like Yao, whose incomes haven’t kept pace. And the discontent that a widening gap between privileged and poor can generate deeply worries China’s communist leaders, who are mindful that the anti-government protests that toppled Egypt’s government earlier this year were triggered in part by discontent over climbing food costs. Yao says he envies people who can eat what they like without concern for cost, but tries not to dwell on it. “Yes, it’s unfair,” he said. “But I know I just have to keep going. I have to work hard and it will get better.” Even those benefiting from China’s rising prosperity such as Zhong, the Beijing architect, are concerned. “Their incomes are not rising as fast so for them this is difficult,” he said. “I think the government needs to find a way to help them raise that sector’s incomes too, and take care of them.”

Read the full article →

Totally Green Appoints Former USDA Official, Boyd K. Rutherford, as Strategic Advisor

May 9, 2011

TULSA, OK–(Marketwire – May 9, 2011) – Totally Green, Inc. ( PINKSHEETS : TLGN ), a pioneer in organic food processing systems and compostable packaging alternatives, has appointed the former U.S. Department of Agriculture’s (USDA) Assistant Secretary for Administration, Boyd K. Rutherford, as a strategic advisor.

Read the full article →

Obama’s Oil Market Fraud Squad May Miss Wall Street Abuses

April 22, 2011

WASHINGTON — On Thursday, President Obama unveiled a new working group to combat any fraud or manipulation in the oil and energy markets that may be contributing to near-record gas prices. But some economists and market experts worry that by focusing on criminal activity, Obama is shrugging off a much bigger problem: rampant Wall Street speculation in commodities markets that has helped drive up food and energy prices in the past. “If prices start moving quickly up, you can get a side effect … that people might try to play [fraudulent] games of one sort or another,” said Massachusetts Institute of Technology economist John Parsons. “But it wouldn’t be central to the price movement” currently being seen in the market, he said. Gas prices are approaching record levels set in 2008, when prices at the pump eclipsed $5 a gallon. While unrest in the Middle East is almost certainly playing a major role in boosting current prices, increased speculation in commodities markets is likely contributing to the near record prices. The number of speculative bets being placed on oil and gas now far exceeds that of the 2008 price swing , which many economists believe was driven by excess speculation. Moreover, on March 21, Goldman Sachs analyst David Greely advanced the argument that Wall Street speculation was helping drive up oil prices in a memo sent to the bank’s clients. But, if speculative excess is contributing to current sky-high gas prices, such activity may not be illegal, in part because the Commodities Futures Trading Commission has not yet issued key regulations intended to rein in Wall Street gambling on food and energy prices. Congress ordered the agency to crack down on excessive speculation with last year’s financial reform bill, but the CFTC has been slow to implement new rules in the face of intense lobbying from Wall Street bankers. Financiers are quick to note that commodities markets need speculation — a raw bet that the price of oil or food will move up or down — in order to function. But economists say that too much speculation can distort the market, leading to wild price swings. Even if so-called “fundamental” factors are driving prices, heavy speculation can cause prices to swing further than normal supply and demand forces would dictate. In January, the CFTC announced it would push back implementing ‘position limits’, a key regulatory tool that restricts the size of the bets investors can make on commodities, in order to collect more data. But many reform advocates and CFTC Commissioner Bart Chilton say that there is plenty of data available to implement new rules now. “What the administration and others should do, which they have the power to do quickly, is impose position limits, which would stop excessive speculation now,” said Dennis Kelleher, a former securities lawyer with Skadden, Arps, Slate, Meagher & Flom who now heads the financial reform advocacy group Better Markets. “An investigation into criminal acts is not likely to lead to much.” Attorney General Eric Holder, who is in charge of the new inter-agency taskforce, specifically instructed members of the new taskforce in a Thursday memo to look into “the role of speculators and index traders in oil futures markets” — something the CFTC is already required to do. Officials from the CFTC, the Federal Reserve, the Federal Trade Commission, the Department of Agriculture, the Deparment of Energy and state attorneys general will be part of the group. But Chilton, the CFTC’s strongest proponent of reining in commodity speculation, says that the task force may well do some good. “Seventy-five percent of the cases we send to the Justice Department for criminal prosecution are rejected,” Chilton told The Huffington Post. “But if we can work more closely with the DOJ folks, we may be able to put more people in jail.” Nevertheless, Chilton said the CFTC should be taking steps independent of the task force: “That doesn’t mean that the working group is a panacea for actions that can be taken by regulators right now. The position limits are something we can do right now. I don’t need a task force to tell me to do that.” Unlike the stock market and other capital markets, commodities markets are not designed to function as a forum for investment vehicles. Instead, commodity markets are supposed to allow farmers, manufacturers and other producers to hedge the risks of doing business. By taking out a futures contract, or similar bet in the derivatives markets, farmers can lock in a price for their crops, protecting themselves from price changes. Producers need someone to take the other side of their price bets, whether it be another producer or, as it more frequently is, a Wall Street trader. Commodities markets work well when around 30 percent of the market is dedicated to speculation, According to Kelleher. But since the mid-2000s, the share of speculators in commodity market activity has increased to about 70 percent, Kelleher says, in part driven by new commodities “index funds,” which allow investors to bet on the price of several commodities at once.The size of those funds expanded from about $15 billion in 2003 to $200 billion in 2008 , and are currently valued at over $400 billion , according to Barclays Capital. The explosion in the over-the-counter derivatives market has also contributed significantly to oil price increases, according to Kelleher, by allowing investors to place huge bets on commodities without either regulatory oversight or market scrutiny. The derivatives market for commodities grew from about $674 billion in 2001 to $13.2 trillion by June 2008 , according to the Bank for International Settlements. Last year’s financial overhaul gave the CFTC authority over that entire derivatives market — one vastly larger than the $5 trillion futures market that the agency had previously policed in isolation. Whatever new rules the CFTC writes, they will need funding additional funding to enforce them. “The CFTC’s current funding is far less than what is required to properly fulfill our significantly expanded mission,” CFTC Chairman Gary Gensler warned in April 12 testimony before the Senate Banking Committee . But Obama was willing to negotiate away additional funding for the agency during negotiations over the budget for the rest of 2011. Under the budget deal Obama struck with congressional Republicans earlier this month, the CFTC will receive a $34 million boost in funding for the remainder of the year. But, even with that additional cash, the agency will receive about $60 million less this year than the amount Obama requested for the agency under his 2011 budget. Calls to the White House were not returned. The Department of Justice declined to comment. Elise Foley contributed to this report.

Read the full article →

Agria Announces CFO Transition

April 15, 2011

BEIJING–(Marketwire – April 15, 2011) – Agria Corporation ( NYSE : GRO ) (the “Company” or “Agria”), a China-based company with investments in the agriculture sector, announced today that Christopher Boddington, Chief Financial Officer, has resigned effective April 18, 2011. Mr. Boddington stepped down from his position to pursue other opportunities and not as a result of any disagreement with the Company regarding financial or accounting practices. The Company has initiated an executive search for a new Chief Financial Officer.

Read the full article →

Obama Prevents Budget Cuts To Favorite Programs

April 12, 2011

WASHINGTON — Details of last week’s hard-won agreement to avoid a government shutdown and cut federal spending by $38 billion were released Tuesday morning. They reveal that the budget cuts, while historic, were significantly eased by pruning money left over from previous years, using accounting sleight of hand and going after programs President Barack Obama had targeted anyway. Such moves permitted Obama to save favorite programs – Pell grants for poor college students, health research and “Race to the Top” aid for public schools, among others – from Republican knives. And big holes in foreign aid and Environmental Protection Agency accounts were patched in large part. Republicans also gave up politically treacherous cuts to the Agriculture Department’s food inspection program. The full details of Friday’s agreement were released early Tuesday Morning. They reveal a lot of one-time savings and cuts that officially “score” as cuts to pay for spending elsewhere, but often have little to no actual impact on the deficit. As a result of the legerdemain, Obama was able to reverse many of the cuts passed by House Republicans in February when the chamber approved a bill slashing this year’s budget by more than $60 billion. In doing so, the White House protected favorites like the Head Start early learning program, while maintaining the maximum Pell grant of $5,550 and funding for Obama’s “Race to the Top” initiative that provides grants to better-performing schools. Instead, the cuts that actually will make it into law are far tamer, including cuts to earmarks, unspent census money, leftover federal construction funding, and $2.5 billion from the most recent renewal of highway programs that can’t be spent because of restrictions set by other legislation. Another $3.5 billion comes from unused spending authority from a program providing health care to children of lower-income families. Still, Obama and his Democratic allies accepted $600 million in cuts to a community health centers programs, $414 million in cuts to grants for state and local police departments, and a $1.6 billion reduction in the Environmental Protection Agency budget, almost $1 billion of which would come from grants for clean water and other projects by local governments and Indian tribes. The National Institutes of Health, which funds critical medical research, would absorb a $260 million cut, less than 1 percent of its budget, instead of the $1.6 billion cut sought by House Republicans. Family planning programs would bear a 5 percent cut rather than being completely eliminated. Homeland security programs would have to take their first-ever cut, though much of the 2 percent decrease comes from a $786 million cut to first responder grants to state and local governments. The IRS would see its budget frozen but be spared the 5 percent cut sought by House Republicans. About $10 billion of the cuts already have been enacted as the price for keeping the government open as negotiations progressed; lawmakers tipped their hand regarding another $10 billion or so when the House passed a spending bill last week that ran aground in the Senate. For instance, the spending measure reaps $350 million by cutting a one-year program enacted in 2009 for dairy farmers then suffering from low milk prices. Another $650 million comes by not repeating a one-time infusion into highway programs passed that same year. And just last Friday, Congress approved Obama’s $1 billion request for high-speed rail grants – crediting itself with $1.5 billion in savings relative to last year. The underlying issue is long overdue legislation to finance the day-to-day budget of every Cabinet department, including the Pentagon, for the already half-completed 2011 fiscal year. The measure caps 2011 funding for such operating budgets at about $1.2 trillion. About $10 billion of the cuts comes from targeting appropriations accounts previously used by lawmakers for so-called earmarks, those pet projects like highways, water projects, community development grants and new equipment for police and fire departments. Republicans had already engineered a ban on earmarks when taking back the House this year. Republicans also claimed $5 billion in savings by capping payments from a fund awarding compensation to crime victims. Under an arcane bookkeeping rule – used for years by appropriators – placing a cap on spending from the Justice Department crime victims fund allows lawmakers to claim the entire contents of the fund as budget savings. The savings are awarded year after year. Even before details of the bill came out, some conservative Republicans were assailing it. Rep. Mike Pence, R-Ind., said he probably won’t vote for the measure, and tea party favorite Michele Bachmann, R-Minn., is a “nay” as well. The $38 billion in cuts, Rep. Tim Huelskamp, R-Kan., wrote on his Facebook page, “barely make a dent” in the country’s budget woes. Huelskamp and other conservatives are also upset that most conservative policy “riders” added by Republicans were dropped from the legislation in the course of the talks. The White House rejected GOP attempts to block the EPA’s ability to issue global warming rules and other reversals of environmental regulations. Obama also forced Republicans to drop an effort to cut off Planned Parenthood from federal funding, as well as GOP moves to stop implementation of Obama’s overhauls of health care and Wall Street regulation. The administration also thwarted a GOP attempt to block new rules governing the Internet, as well as a National Rifle Association-backed attempt to neuter a little-noticed initiative aimed at catching people running guns to Mexican drug lords by having regulators gather information on batch purchases of rifles and shotguns. Anti-abortion lawmakers did, however, succeed in winning a provision to block taxpayer-funded abortions in the District of Columbia. And House Speaker John Boehner, R-Ohio, won funding for a personal initiative to provide federally funded vouchers for District of Columbia students to attend private schools. Instead of sharply cutting the Securities and Exchange Commission and the Commodities Futures Trading Commission, both agencies would get increases under the legislation as they gear up to implement last year’s overhaul of financial regulation. And renewable energy programs are cut $407 million below last year, almost 20 percent. The Army Corps of Engineers , which funds flood control and inland waterway projects, will absorb a $578 million cut, representing about 10 percent of its budget.

Read the full article →

Farmers Not To Blame For High Food Prices

April 4, 2011

DES MOINES, Iowa — Farmers and ethanol producers have braced for what they expect could be widespread criticism as corn prices are rising rapidly and other food costs are following. A similar increase five years ago generated a storm of criticism, with many in the food industry blaming the ethanol industry for buying up corn that could be used for food and faulting farmers for capitalizing on the higher prices. Many farmers and ethanol producers worried then the complaints would force a change in agriculture and energy policies and fewer subsidies for their industries, but prices came down and that didn’t happen. Now, they’re concerned again as corn prices rose even higher last week following an announcement that U.S. farmers are planting the second largest corn crop since 1944, but it won’t be enough to meet growing worldwide demand. Corn has traded at more than $7 a bushel this month, more than double last summer’s $3.50, and many traders say it could pass the record $7.65 set in 2008. But experts say those prices have little to do with what shoppers pay at the grocery store, and farmers and ethanol producers aren’t responsible for recent increases in the cost of groceries. “It’s a whole slew of things that have influenced that price,” said Chad Hart, an agricultural economist at Iowa State University. He ticked off some of them: “When you look at the cost of our food, it is related to the cost of corn, soybeans and wheat and cattle but also the cost of oil, gas, diesel and unrest in other parts of the world.” All of those factors mean consumers may have more to complain about for a while. Corinne Alexander, an agriculture economist from Purdue University, predicted food inflation will average between 4 percent and 4 1/2 percent this year. Normal food inflation is about 2 1/2 percent, she said. “We are going to enter that world again where folks are getting squeezed and they want an explanation for it,” she said. Rick Tolman, chief executive of the National Corn Growers Association, said his group has already begun to hear complaints aimed at farmers that are similar to those expressed in 2006 and 2007, when congressional hearings on commodity prices and market speculation were held. He said the criticism is unfounded. “(Corn) prices went up in 2006-07 and food prices followed and corn prices came down and we see didn’t see food companies lower their prices,” he said. Scott Faber, a spokesman for the Grocery Manufacturers Association, disputed that, saying food prices declined last year as a result of commodity prices falling the year before. “Some products are much more sensitive to increases in corn prices, including meat, poultry, eggs and dairy products,” he said. “For some products, you see it fairly quickly and see an equally quick decrease and for other products the lag time is longer.” Tolman said one problem is that there’s more speculation in the corn market – in which people base investments on what they think the market will do in the future – than there should be. But, he said, that’s not farmers’ fault. Alexander agreed, saying poor weather last year led to a smaller harvest than expected and, with demand high and reserves at their lowest level in 15 years, commodity prices rose. But farmers don’t control that, she said. “No individual farmer can control the price he receives for his crop,” she said. “That’s determined by global supply and demand factors.” Ethanol producers acknowledge they’ve increased demand for corn but say it’s not enough to affect food prices. Matt Hartwig, a spokesman for the Renewable Fuels Association, said the ethanol industry only uses about 25 percent of the nation’s corn supply. He said he believes much of the criticism he has heard is because most people don’t understand what goes into the prices of groceries. “Ethanol has increased demand for corn, but the lion’s share of the responsibility for rising food prices has to do with volatile energy prices,” Hartwig said. “It is the price of energy, oil, gas, diesel, that makes what you buy at the store more expensive.” The U.S. Department of Agriculture report released last month that broke down where each dollar spent on groceries goes. Farmers received an average of 11.6 cents per dollar in 2008, the latest year data was available. That was down from 13 1/2 cents 10 years ago and from 14 1/2 cents in 1993, the USDA report showed. The rest of the money goes to processing, packaging, transportation, retail trade and food service, which includes any place that prepares meals, snacks and beverages for immediate consumption including deli counters and in-store salad bars. The share going to each category has declined some, except for food service which now gets 33.7 cents of every dollar spent, the USDA reported. “While the commodity and food prices have been going up, the share going back to the farmer has been going down,” Hart said.

Read the full article →

Turkey Burger Recall Announced

April 3, 2011

The Jennie-O Turkey Store has recalled 54,960 pounds of frozen, raw turkey burger products, the U.S. Department of Agriculture announced . The recall was prompted by possible Salmonella contamination, according to the release . The affected product will have a use date of Dec. 23, 2011 and includes: “4-pound boxes of Jennie-O Turkey Store® “All Natural Turkey Burgers with seasonings Lean White Meat”. Each box contains 12 1/3-pound individually wrapped burgers.” At least 12 people in Wisconsin and nine in other states have reported illnesses, Milwaukee Journal-Sentinel reported , prompting the recall. According to WalletPop , illnesses have also been reported in Colorado, Ohio, Arizona, California, Georgia, Illinois, Mississippi, Missouri and Washington. For more information, read the USDA release here.

Read the full article →

Air Force Is Going Green, Flies F-15 Fueled on Plant Oil Over Phillies Home Opener

April 1, 2011

The sellout crowd who turned out Friday to watch the Phillies win their home opener against the Houston Astros in Philadelphia were treated to a pre-game glimpse into the future. No, not another National League East pennant, though anything is possible on opening day. Instead, minutes before the first pitch, fans were treated to the first “green” flyover as an Air Force F-15 fighter jet streaked over Citizens Bank Park powered in part by fuel made from plant oil. One of the four jets from the 335th Fighter Squadron based in North Carolina flew on a blend of 50 percent traditional jet fuel and 50 percent synthetic biomass fuel made from camelina oil grown in Montana. Unlike ethanol, which is made from corn, camelina is a weed in the mustard family and not usually considered edible. It is also considered more fuel-efficient than ethanol. The milestone air show came two days after President Barack Obama sought to revive his battered energy policy . In a speech at Georgetown University, Obama said the nation’s energy future depends on making fuel out of renewable resources to reduce reliance on foreign oil and polluting fossil fuels. “Just last week, our Air Force used an advanced bio-fuel blend to fly an F-22 Raptor faster than the speed the sound,” Obama said of the first operational test of the new fuel. “In fact the Air Force is aiming to get half of its domestic jet fuel from alternative sources by 2016. And I’m directing the Navy and the Department of Energy and Agriculture to work with the private sector to create advanced bio-fuels that can power not just fighter jets, but also trucks and commercial airliners.” The U.S. Air Force is the biggest user of aviation fuel in the Department of Defense — it burns 2.5 billion gallons a year, or the equivalent of a small airline — and it accounts for 10% of the total domestic jet fuel market. It has taken the lead in researching and testing new biofuels that can be used not only by military aircraft but by commercial airlines. Private air carriers are eager to find commercially viable, environmentally friendly alternative fuels, especially before the European Union slaps a planned carbon tax on planes landing or taking off from its airports in 2012. They are working with universities, the military and other government agencies through the Commercial Aviation Alternative Fuels Initiative to develop fuels made from plant seed oil, animal fat and various waste greases. The F-22 and F-15 flights prove high-performance jets can fly on synthetic fuel. The challenge, now, is to produce the fuel at a reasonable price. Half of the $45 million budget for the Air Force development program, which began in January 2009, has been used to buy gas. The first batch of synthetic test fuel cost a whopping $65 per gallon. By the time of the second fill-up in the fall of 2010, price had dropped to $35 per gallon. Though significantly lower, that price is still more than 10 times the average $3.03 per gallon the Air Force pays for conventional jet fuel. So until manufacturers can produce the eco-friendly fuels in larger volumes, aircrews will keep flying on carbon. “The goal is to be prepared to use the fuel when it becomes cost-competitive in quantities we need,” Jeff Braun, chief of the Air Force’s alternative fuels certification division, told HuffPost. “We are relying on industry and fuel producers to make the necessary investments in plants and start making the fuel” to bring the price down for both military and commercial use. But even as companies slowly scale up production, the Air Force says it has no plans to fly combat missions using beef tallow anytime soon.

Read the full article →

Senate Dems: GOP Cuts Would Cause Surge In Gas Prices

March 22, 2011

WASHINGTON — With gas prices soaring, 45 Senate Democrats signed a letter on Tuesday urging GOP leaders to abandon their proposed cuts to the budget for a key regulator that oversees the food and energy markets, part of a broader effort to reduce government spending. The letter, sent to Senate Minority Leader Mitch McConnell (R-Ky.) and House Speaker John Boehner (R-Ohio) on Tuesday, argued that Republicans should protect funding for the Commodity Futures Trading Commission, which would be cut by one-third under a defeated House GOP plan. “The CFTC serves as an important ‘cop on the beat,’ working to protect American consumers by cracking down on manipulation and other market abuses that can drive up oil prices,” the letter reads. “At a time where gas prices are rising and squeezing American families, we have a responsibility to provide our watchdogs the resources they need to fulfill their important oversight and regulatory responsibilities.” For their part, Republican leaders say the responsibility for rising gas prices rests with the Obama administration, which put a freeze on some offshore wells last year following the disastrous oil spill in the Gulf of Mexico. Boehner spokesman Michael Steel dismissed the letter from Senate Democrats as an attempt to divert the blame for the price of oil. “This is just another attempt to distract from Washington Democrats’ irresponsible opposition to increased American energy production, which would lower gas prices, reduce our dependence on foreign energy, and create American jobs,” Steel told HuffPost. “American families know talk is cheap but gas is not — and the Democrats who run Washington have no plan to help.” House and Senate leaders have struggled to reach an agreement on government funding for the remainder of the fiscal year, partly because of riders lumped in with the funding bill that would block money for Planned Parenthood, last year’s health care law, the Environmental Protection Agency and consumer financial protection. The two chambers must compromise before a current stopgap measure expires on April 8. The House Republican bill, which the Senate voted down on March 9 , would require the CFTC to lay off about a third of its staff. Some economists and consumer advocates are concerned that aggressive Wall Street speculation in energy markets is helping to drive up the price of food and gas around the world. “So long as you have money available to banks at zero cost, no long-term productive outlets for investment, and the capacity to make money by manipulating commodity pools, the situation is ripe for speculative excess,” University of Texas economist James Galbraith told HuffPost last month. Oil prices have been soaring in recent months , eclipsing $100 a barrel, which has sent the price of gas to over $3.50 a gallon and nearly $4 in California. A report prepared for the April meeting of the Group of 20 leading world economies by the Organization of Economic Cooperation and Development attributes rising prices primarily to increases in real demand, rather than financial speculation. Yet the increase in prices has also tracked speculation’s rise, prompting the U.N.’s Food and Agriculture Organization to cite “growing linkage with outside markets, in particular the impact of ‘financialization’ on futures markets” as a “root cause” of food price volatility in a September meeting. According to CFTC Commissioner Bart Chilton, the number of Wall Street bets on energy prices has increased by 64 percent since June of 2008, when heavy speculation helped push oil prices near $150 a barrel, driving gas near $5 a gallon. The CFTC has long overseen a small part of these markets, with roughly $5 trillion a year in trading. But under the Dodd-Frank financial reform bill signed into law by President Barack Obama, the agency is now responsible for policing a $500 trillion industry. CFTC Chairman Gary Gensler has said regulators will be unable to implement reforms without a significant increase in funding. The Obama administration has proposed boosting the CFTC’s annual budget by 77 percent, from $168.8 million to $298.8 million. That number is small relative to other major regulators — The Securities and Exchange Commission, another key monitor of Wall Street trading, received $1.12 billion last year. In February, Sen. John Boozman (R-Ark.) told HuffPost that speculation in commodities markets was a “legitimate concern,” arguing that it not only affected energy prices, but food prices as well. “The reality is, as commodity prices go up, there’s only a finite amount for food aid and things. People really are going to start dying,” Boozman said. As for Obama’s drilling policies, the president defended his record on drilling earlier this month, stating during a press conference that domestic oil production is at a seven-year high and the administration is willing to dip into oil reserves if necessary. Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources committee, likewise defended Obama during a floor speech last week. He said energy experts have dismissed claims that the administration’s drilling policies led to higher gas prices, arguing uncertainty in the Middle East is a more likely culprit. “First, we need to enable further expansion of our renewable fuel industry, which is currently facing infrastructure and financing constraints,” Bingaman said. “Second, we need to move forward the timeline for market penetration of electric vehicles. Finally, we need to make sure we use natural gas vehicles in as many applications as make sense based on that technology.” Democrats have made oil prices a key talking point during negotiations over the budget, arguing that Republican measures weaken efforts to expand alternative fuel sources. The House GOP budget cut funding for energy efficiency and renewable energy by $786 million from current levels and reduced the Department of Energy’s loan guarantee budget by $250 million. “We find it equally troubling that your preferred budget would cut billions of dollars in investments in critical programs focused on developing new alternative fuels and clean energy technologies, undermining our competitiveness and increasing our trade deficit with oil producing nations,” Democrats wrote in the letter. “We urge you to reverse these policies that will only set our nation backward, and put America’s independence from foreign oil even further out of reach.”

Read the full article →

Devinder Sharma: Is India’s GDP Growth for Real?

March 7, 2011

Economists are no better than book-keepers. They often dress up figures to create an illusion of growth. This year’s economic growth figures In India have been very cleverly fudged to create a mirage. It happened earlier in 2003-04. After a bad drought year of 2002, economists wrongly computed normal foodgrain production in 2003 as growth, in return jacking up the economic growth figures. Excited, the ruling NDA Coalition went to elections in 2004 riding the mirage of ‘shining India’. The rest is history. Once again, Economic Survey 2011 talks of robust growth and steady fiscal consolidation as the hallmark of the Indian economy. After all, with a growth of 5.4 per cent for agriculture and the allied sector on the back of the increase in foodgrain production this year, country’s GDP has been worked out at 8.6 per cent. I see jubilation all around. Business CEOs, bank heads and the policy makers are all excited. If you have seen the budget discussion — both prior and after the budget was presented on Feb 28 — you would have noticed that none of the economists have questioned the veracity of the claim. That is what worries me. Now let us look at what has been claimed. The GDP in 2010-11 has been estimated at 8.6 per cent. Given the buoyancy in agriculture, and hoping that the monsoon would be normal this year, the government estimates that GDP in 2011-12 would grow at 9 per cent . And as many economic writers have explained the impressive economic growth is because of a resounding performance of the farm sector. This brings me to the question whether agriculture has really grown? Since the 8.6 per cent growth the country has achieved in 2010-11 hinges on the robust performance of agriculture or as some analyst say on the manner in which agriculture has rebound, it is important to find out how true are the claims? Agriculture growth in 2010-11 has been estimated at 5.4 per cent. This is primarily because foodgrain production for the current year is anticipated at 232.07 million tonnes. A year earlier, in 2009-10, agriculture production had fallen to 218.11 million tonnes on account of a widespread drought in 2009, a drop of 16 million tonnes from the previous year’s record harvest of 233.88 million tonnes. In other words, it is the ‘quantum jump’ in foodgrain production, from 218.11 million tonnes in 2009-10 to 232.07 million tonnes in 2010-11, that has driven the farm growth. Of course we know that foodgrain production is not the only criteria when we work out farm growth but it remains the predominant factor. But is India justified in computing the increase in foodgrain production in 2010-11 as the reason for 5.4 per cent growth in agriculture? Let us look at some of the production figures. In the 2009-10 crop year, farm sector growth was only 0.4 per cent due to severe drought in 2009, which hit almost half the country, reducing foodgrain production by 16 million tonnes, says the Economic Survey 2010. In 2010-11, rainfall was normal, and so the country harvested 232.07 million tonnes. Interestingly, while the nation rejoices at the recovery in foodgrain production this year, the fact remains that the anticipated food production for 2010-11 at 232.07 million tonnes actually is lower than what was achieved in 2008-09 by roughly 2 million tonnes. Foodgrain production in 2008-09 was 233.88 million tonnes, and in 2010-11 it is 232.07 million tonnes . The country has therefore not even achieved the production recorded two years earlier, and yet we are mistaking it for growth. I don’t understand how can the fluctuation in foodgrain production resulting from weather aberration be construed as growth? More importantly, why are the distinguished economists, and there are a dime a dozen of them, point out this serious flaw in the estimates of farm growth? Now, consider this. Assume that the 2009 drought had not happened. With the monsoon behaving normally, foodgrain production would have hovered around 232 to 234 million tonnes. If the foodgrain production had remained around twhat was achieved in 2008-09, this year’s foodgrain production would not have shown a quantum jump of 14 million tonnes. Under the best of conditions, India could have claimed an increase in foodgrain production by say 2-3 million tonnes. If the foodgrain production last year had remained at 230 million tonnes or more, the agriculture growth this year would not have been 5.4 per cent but somewhere in the range of 0.5 to 1 per cent. If the farm growth rate had remained at 1 or a maximum of even 2 per cent, the country’s GDP would have been around 6 per cent. The GDP estimates for 2010-11 therefore are fake. As I said earlier, mere fluctuations in foodgrain production is not growth. In agriculture, it is wrong to compute growth based on annual production figures (now it is being done on a quarterly basis). Growth in foodgrain productions has to be estimated on a long-term basis, in any case not for a period less than an average of 5 years, to know whether there has truly been any growth or not.

Read the full article →

Scott Bittle and Jean Johnson: Fiscal Follies: Tackling the National Debt in 500 Words or Less

February 11, 2011

Since we write about public opinion and believe strongly in public engagement , we’ll be the first to admit that much of the public is woefully uninformed about the federal budget and the country’s choices for getting a handle on its mushrooming national debt. Most Americans know it’s a problem, and they want it fixed. After that, things get a lot hazier. Unfortunately, the country’s leadership has now frittered away much of the time we could have used to educate the American people on this issue. President Obama is submitting his proposed budget Monday , and Republicans are already putting out their counter-plans , but neither has really laid the groundwork with the public for the implications of the spending cuts or tax increases that are necessary if we really want to get our finances under control. Now we really need to get a move on, and the electorate is both unrealistic and cranky. So here goes. Here’s what Americans really need to know (in 500 words or less): We have to start now because this could get ugly really fast. In about 10 years, the federal debt will be as big as our entire economy –100 percent of GDP. We’ll be spending more on interest payments than on defense. Just cutting what people normally think of as “big government” won’t do it. In 2010, the deficit was about $1.3 trillion. Eliminating the Departments of Education, Energy, Agriculture, Transportation, HHS, and HUD entirely would save less than $300 billion . We would still have a trillion dollars worth of red ink. Income tax rates are lower now than they have been for most of the last four decades. In the 1970s, top tax rates were twice as high. We’ve extended current rates for two years while the economy improves. After that, they need to be on the table. Yes, Social Security and Medicare are part of it. In as little as 10 years, government auditors say that spending on Social Security, Medicare and Medicaid, plus interest on the debt, could suck up more than 90 cents out of every tax dollar. There would be almost no money for anything else. It’s time to stop the blame game. The federal budget has been in the red for 31 out of the last 35 years , and both President Bush and President Obama added trillions of dollars to the debt. There’s enough blame to go around. It’s finding solutions that matters. Don’t fall for the bogus Beltway debate over “tackling the budget” versus “focusing on the economy.” It’s a false choice. We have to do both, and we can decide on changes now that kick in once the economy improves. There are hundreds of different proposals that would help. The big choice for most of us is whether to go with one that focuses on cutting spending even in popular areas to keep taxes low, or one that preserves popular programs, but raises taxes instead. Nearly all reasonable plans include some of both. Be ready to compromise. To solve this problem, we’ll all have to live with something we don’t like. Refusing to compromise means more delay, and that’s the one thing we can’t afford. If we act quickly and responsibly, we can do this.

Read the full article →

Video: Abbassian Says Global Food Prices May Keep Rising

January 13, 2011

Jan. 13 (Bloomberg) — Abdolreza Abbassian, senior economist at the United Nations’ Food and Agriculture Organization, discusses global food prices. The Rome-based FAO said last week that its world food-price index rose to a record in December, topping a previous all-time high set in June 2008. Abbassian speaks from Rome with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)

Read the full article →

Pakistan Bangladesh Enhances Trade and Agriculture Cooperation

December 15, 2010

Pakistan Bangladesh Enhances Trade and Agriculture Cooperation

Read the full article →

Food Stamp Usage Soars Among Working Families

October 22, 2010

HONOLULU — Lillie Gonzales does whatever it takes to provide for three ravenous sons who live under her roof. She grows her own vegetables at home on Kauai, runs her own small business and like a record 42 million other Americans, she relies on food stamps. Gonzales and her husband consistently qualify for food stamps now that Hawaii and other states are quietly expanding eligibility and offering the benefit to more working, moderate income families. Data from the U.S. Department of Agriculture reviewed by The Associated Press shows that 32 states have adopted rules making it easier to qualify for food stamps since 2007. In all, 38 states have loosened eligibility standards. Hawaii has gone farther than most, allowing a family like Gonzales’ to earn up to $59,328 and still get food stamps. Prior to an Oct. 1 increase, the income eligibility limit for a Hawaii family of five was $38,568 a year. “If I didn’t have food stamps, I would be buying white rice and Spam every day,” said Gonzales, whose Island Angels business makes Hawaiian-style fabric angel ornaments, quilts, aprons and purses. Eligibility for food stamps varies from state to state, with the 11 most generous states allowing families to apply if their gross income is less than double the federal poverty line of $22,050 for a family of four on the U.S. mainland. The threshold is higher in Alaska and Hawaii. With more than 1 in 8 Americans now on food stamps, participation in the program has jumped about 70 percent from 26 million in May 2007, while the nation’s unemployment rate rose from 4.3 percent to 9.2 percent through September of this year. “We’ve seen a huge increase in participation due to the economic downturn,” said Jean Daniel, a spokeswoman for the USDA’s Food and Nutrition Service. “That’s the way this program was designed.” In addition to helping alleviate economic pressures, many states embrace the popularity of food stamps because their cost – $50 billion last year – is paid entirely by the federal government. States are only responsible for paying half of their programs’ administrative costs. Food stamps have been blasted by some Republicans in this midterm election season as just another federal entitlement program, with former House Speaker Newt Gingrich framing the vote as a choice between “the party of food stamps” and Republican policies that create jobs. Participants in the food stamp program, technically called the Supplemental Nutrition Assistance Program, receive a per person average of $133 per month to buy staples including milk, bread and vegetables. Shortly after Hawaii announced it was raising its eligibility limits starting this month, three carloads of 10 seniors drove to the Kauai Independent Food Bank to ask if they qualified. Nine of them did, said Judy Lenthall, executive director for the food bank, which helps people apply for food stamps. “We saw an immediate and overwhelmingly wonderful response,” Lenthall said. “It surprised us how fast it’s spreading.” States that have relaxed food stamp eligibility did so by moving to a system where applicants could qualify based on their income, and their other assets such as real estate, vehicles and savings accounts could be ignored. Basing food stamps on income alone allows the newly unemployed and the elderly to seek government food aid without having to first sell their property or exhaust every dollar they’ve earned, said Sue McGinn, director of the food stamp program in Colorado, which will expand eligibility beginning in March. “They won’t have to wipe out their savings to apply for benefits,” McGinn said. Many of these states also raised income limits, although applicants still have to show they’re essentially living at the poverty line after accounting for allowable deductions, including elder medical expenses and child support. “It helps moderate and low-income people who are struggling,” said Stacy Dean of the Washington-based Center on Budget and Policy Priorities. “They’re doing everything we want: they’re working, paying all their bills, taking care of their kids, and they still don’t have enough money at the end of the month to put food on the table.” Since 2000, the only states that haven’t enacted the lower food stamp eligibility requirements are Alaska, Arkansas, Indiana, Iowa, Kansas, Missouri, Nebraska, South Dakota, Tennessee, Utah, Virginia and Wyoming. In Hawaii, where everything from milk to gasoline is typically the highest in the nation, the changes are welcomed by Gonzales and others. “As long as my kids have good food, that’s all I care about,” Gonzales said. “It makes a tremendous difference.” ___ Online: Food and Nutrition Service: http://www.fns.usda.gov/snap/

Read the full article →

Video: FAO’s Abbassian Says Food Price Increases Not a `Crisis’

September 6, 2010

Sept. 6 (Bloomberg) — Abdolreza Abbassian, senior grains economist at the United Nations’ Food and Agriculture Organization, talks about the outlook for food prices. He speaks on Bloomberg Television’s “The Pulse” with Andrea Catherwood.

Read the full article →

E. Coli Outbreak Puts Focus On Meat Oversight

September 3, 2010

ST. PAUL, Minn. — The first known U.S. outbreak linked to a rare strain of E. coli in ground beef is prompting a fresh look at tougher regulations to protect the nation’s meat supply. Three people in Maine and New York became ill this summer after eating ground beef traced back to a Cargill plant in Wyalusing, Pa. Cargill Meat Solutions, a subsidiary of Minneapolis-based Cargill Inc., recalled about 8,500 pounds of ground beef on Saturday, and regulators warned consumers to throw out frozen meat purchased at BJ’s Wholesale Clubs in eight eastern states. The ground beef had a use-by-or-freeze-by date of July 1. Dr. Elisabeth Hagen, who was appointed undersecretary of food safety at the U.S. Department of Agriculture nine days before the recall, has signaled interest in expanding federal oversight of meat beyond the most prevalent strain of E. coli. “In order to best prevent illnesses and deaths from dangerous E. coli in beef, our policies need to evolve to address a broader range of these pathogens,” Hagen said in a statement. The New York Times first reported the USDA interest in federal oversight of other strains of E. coli following the Cargill recall. The federal government currently requires meat plants to test for the most virulent strain of E. coli, O157:H7, which causes an estimated 70,000 illnesses a year. They don’t have to test for six other less common strains of E. coli, including the O26 version that sickened those involved the Cargill recall. Industry officials said tests aren’t widely available to detect the other strains of E. coli. They also said more testing isn’t the most effective way to keep meat safe. J. Patrick Boyle, who heads the American Meat Institute, warned Agriculture Secretary Tom Vilsack in a letter last month that more testing would cause “more harm than good” by imposing new costs and diverting attention from efforts to prevent toxins from getting into the food supply. “Testing doesn’t make food safe in and of itself. You have to have some preventive measures in place,” said James H. Hodges, the trade group’s executive vice president. Cargill spokesman Mike Martin said Friday that the latest outbreak shows the need to keep searching for solutions to reduce the potential health risks. He said Cargill worked with disease investigators to trace the outbreak and voluntarily recalled the product. He added that none of the three people who became sick were hospitalized. “Certainly I think we need to take a fresh look at this because of the apparent linkage of O26 to beef,” Martin said. Hundreds of varieties of E. coli live naturally in the intestines of cattle and other animals without making them sick. For people, symptoms of E. coli infection include bloody diarrhea, dehydration and in severe cases, kidney failure. Consumers can avoid getting infected from tainted meat by cooking it thoroughly and using a meat thermometer to make sure it reaches an internal temperature of at least 160 degrees. The BJ’s Wholesale Clubs affected by the voluntary recall are in Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New York, New Jersey and Virginia, according to the company’s website.

Read the full article →

Agria Streamlines Operations Management

September 3, 2010

BEIJING–(Marketwire – September 3, 2010) –  Agria Corporation ( NYSE : GRO ) (the “Company” or “Agria”), a China-based company with investments in the agriculture sector, today announced the streamlining of the management of its China operations.

Read the full article →

Art Levine: Beyond Messaging: Obama’s Path to Jump Starting the Economy Without Congress

August 26, 2010

The rising jobless claims and skidding home sales make the Democrats’ selling job this November even tougher . But, cowed by deficit hawks, neither the Obama administration or Congress has shown an appetite for passing the sort of large-scale job creation packages that could make a difference in the ongoing jobless crisis . As the Washington Post observed this week, “A rapidly weakening economy threatens to undermine President Obama’s assertion that he has set the nation on a path to prosperity and, with barely two months until congressional midterm elections, Democrats find themselves with few options for reviving the faltering recovery. ” But the American Prospect and the progressive policy center Demos released a special report this week, to be featured in the magazine’s next issue, that could offer some short-term and long-term help by using the power of government agencies and contracts. These under-used strategies could be put into effect without needing to thread the needle of centrist Democrats and obstructionist Republicans in the Senate. As Robert Kuttner points out in the lead essay to this report, “The Case for Presidential Action,” that also features In These Times writer David Moberg, “The U.S. government spends half a trillion dollars a year to buy goods and services from the private sector. Federal procurement, directly or indirectly, influences about one job in four in the entire economy. And most most large national companies do business with the government,” including service and manufacturing companies that pay their workers relatively low wages, thwart unions and deny benefits. During a conference call this week on the report (hat tip to Campus Progress), experts pointed out: It seems Congress has given the administration the power to place conditions on those contracts–and the courts have backed them up. Ann O’Leary, a senior fellow at the Center for American Progress (CAP) senior fellow, notes that “This authority has been used by many presidents for many years.” If these aggressive enforcement and standards-raising actions were combined with effective messaging to scare the hell out of progressives and centrists over the prospect of a GOP and John Boehner take-over, it could conceivably make a difference — although time is running out before November. In his article, “Sweatshop Army: Why does the Pentagon use low-road companies to feed and clothe out troops?,” David Moberg points to the Wornick Company of Cleveland that pays its mostly immigrant work force less than $10 an hour, making it impossible for them to afford the company’s minimum health care plan. “Unfortunately,” Moberg says, “all too often the work on military contracts is ill-paid and abusive, just as it as at Wornick, and not an expression of government’s stated social policy, such as the 1935 Wagner Act’s commitment to encourage collective bargaining.” But more than just raising those contract workers could make a difference. As Demos summarized the authors and their key reform points: Harold Meyerson on the misclassification of regular workers as temporary or contract employees, and the potential impact of a high-profile and systematic enforcement effort targeted at the large companies that employee them. David Moberg on Pentagon contractors that are notorious low-wage employers, and why there is a national security case for government to set and enforce labor standards in defense contracting. This piece looks specifically at the principal contractors producing MREs and military uniforms. David Bensman, Professor of Labor Studies and Employment Relationships at Rutgers University, on federal reclassification of transportation workers and reforming US ports by modernizing safety systems and requiring trucker certification. Steve Franklin on how the Department of Agriculture, which spends upwards of800 million on produce for the school lunch program, can extend bargaining rights to farm workers and sponsor a bill of rights that includes access to sanitary facilities, clean water, and decent housing. Jan Breidenbach on making sure that government-sponsored green housing jobs, which includes the installation of solar panels and retrofitting homes, are high-wage jobs. And others on paying childcare workers a decent wage, insisting on high- quality manufacturing jobs, and the broad social and economic benefits of a high-wage workforce . As a St. Petersburg Times columnist observes: What can be done to undo the damage without legislative action, since Republicans will oppose anything proworker? Kuttner suggests that the most consequential immediate action Obama could take is to start using government’s buying power to reward good labor practices. It must be big-time, governmentwide, and high-profile. One in every four jobs in the economy is influenced by federal procurement, whether it’s foodstuffs for the military or Medicaid payments to nursing homes. Jobs in these industries could be transformed tomorrow if contracts were awarded only to employers who paid living wages, provided benefits, respected labor laws and didn’t interfere with unionizing. As Congress fights over tax breaks for millionaires, the administration could be changing the economic prospects of millions of low-skilled workers. Boosting pay and working conditions for, say, nursing home workers under new Medicaid rules could provide real hope to working poor parents. Yet in the political battles in the run up to the November, the upset victories of some Tea Party candidates in the GOP primaries are adding to the fears of some in the Democratic Party that a mobilized conservative base could trump Democratic arguments that the economy would be worse under the GOP. As Politico reports: Top Democrats are growing markedly more pessimistic about holding the House, privately conceding that the summertime economic and political recovery they were banking on will not likely materialize by Election Day. In conversations with more than two dozen party insiders, most of whom requested anonymity to speak candidly about the state of play, Democrats in and out of Washington say they are increasingly alarmed about the economic and polling data they have seen in recent weeks. They no longer believe the jobs and housing markets will recover — or that anything resembling the White House’s promise of a “recovery summer” is under way. They are even more concerned by indications that House Democrats once considered safe — such as Rep. Betty Sutton, who occupies an Ohio seat that President Barack Obama won with 57 percent of the vote in 2008 — are in real trouble. In two close races, endangered Democrats are even running ads touting how they oppose their leadership. “Democrats kept thinking: ‘We’re going to get better. We’re going to get well before the election,’” said one of Washington’s best-connected Democrats. “But as of this week, you now have people saying that Republicans are going to win the House. And now it’s starting to look like the Senate is going to be a lot closer than people thought.” But some progressives and Democrats are hoping that a more effective message — focusing on part on the consequences of Rep. John Boehner becoming Speaker of the House — might help mobilize voters to resist the upsurge in conservative-driven anger and keep enough Democrats in office. As Washington Post blogger Greg Sargent notes: There’s a reason the White House and Dems are throwing everything they have at John Boehner’s speech attacking Obama’s economic policies: Dems and White House advisers know they must not allow Boehner and the GOP to achieve a clean relaunch of their party and their ideas heading into the midterms. The big underlying fight right now is over whether Republicans will succeed in rebranding themselves, achieving separation from Bush and the party that ran Congress before the Dem takeover, or whether Dems will successfully convince the electorate that a vote for the GOP is a vote for the party that brought our economy to the edge of doom. So the White House is circulating a new set of talking points instructing Dems on the Hill and outside allies to reiterate these ideas: In a speech in Cleveland [this week], House Minority Leader John Boehner laid out Congressional Republicans’ economic dream. Their prescription for the future = the same policies that led to the worst recession since the Great Depression. They want more tax breaks for the rich, less oversight of Wall Street, and a tougher burden for middle-class families… Representative Boehner is ignoring his party’s own record, and he’s hoping that American families will, too. In the eight years before the Obama Administration took office, the Republican Leadership took the record surplus and turned it into a record $1.3 trillion deficit. Their irresponsible policies helped to create the worst economic downturn since the Great Depression, resulting in 22 months straight of job losses across America. Faced with these grim economic numbers, what can Democrats do now to save Congress? A progress writer at Daily Kos, writing under the name Meteor Blades, has some sound suggestions worth considering: To effectively put the Republicans on the defensive, the administration needs more than a message of the-economy-would-be-a-whole-lot-worse if-these-guys-had-been-in-power, even though that assessment is absolutely true. To this end, combined with a thorough thrashing of the GOP for its devil-take-the-hindmost policies, shortly after Labor Day, the administration should present basic elements of a new economic program for the next two years. It should be a program emphasizing our acute emergency, of course. But it should also lay the foundation for resolving some of the chronic problems that helped generate the emergency. That means, as so many critics have said, new approaches to trade, industrial policy, off-shoring, wage stagnation and arbitrage, and regulation. It should also look even deeper, how to deal with people’s needs for economic security in a world in which automation and other productivity-enhancing changes make the old job paradigm obsolete. No way, obviously, can reforms in all those areas be achieved in a mere two years, but a start can be made, a direction laid out. Such an economic program ought also to boast one big project, not just a flashy eye-catcher, but something practical, job-generating and an investment in the future. Replacing all our coal plants with clean-energy sources over a decade would be one possible choice with multiple benefits. But there are others. In the immediate future, these two messages could reinvigorate voters whose enthusiasm for keeping the Party of No out of office has waned during the past few months. Together, they would provide inspiring talking points to activists in the phone-bank and door-to-door trenches for their use in persuading Americans that staying at home, or choosing Republican candidates, will worsen the economic situation. But a far-sighted economic program must ultimately be about something far more important than merely winning an election. Yet given the cautionary tone and policies of the administration so far, even in the face of a continuing economic crisis and looming political disaster, it’s not at all clear such aggressive steps will be taken. UPDATE : There’s mounting evidence, according to the Congressional Budget Office, that President Obama’s stimulus package has had a positive impact on saving and creating millions of jobs. But it’s also transforming the economy, as a new Time magazine article highlights (hat tip to the Daily Beast )—but that reality hasn’t been translated into effective political salesmanship yet. ******************** This article originally appeared in the Working In These Times blog.

Read the full article →

Art Levine: Beyond Messaging: Obama’s Path to Jump Starting the Economy Without Congress

August 26, 2010

The rising jobless claims and skidding home sales make the Democrats’ selling job this November even tougher . But, cowed by deficit hawks, neither the Obama administration or Congress has shown an appetite for passing the sort of large-scale job creation packages that could make a difference in the ongoing jobless crisis . As the Washington Post observed this week, “A rapidly weakening economy threatens to undermine President Obama’s assertion that he has set the nation on a path to prosperity and, with barely two months until congressional midterm elections, Democrats find themselves with few options for reviving the faltering recovery. ” But the American Prospect and the progressive policy center Demos released a special report this week, to be featured in the magazine’s next issue, that could offer some short-term and long-term help by using the power of government agencies and contracts. These under-used strategies could be put into effect without needing to thread the needle of centrist Democrats and obstructionist Republicans in the Senate. As Robert Kuttner points out in the lead essay to this report, “The Case for Presidential Action,” that also features In These Times writer David Moberg, “The U.S. government spends half a trillion dollars a year to buy goods and services from the private sector. Federal procurement, directly or indirectly, influences about one job in four in the entire economy. And most most large national companies do business with the government,” including service and manufacturing companies that pay their workers relatively low wages, thwart unions and deny benefits. During a conference call this week on the report (hat tip to Campus Progress), experts pointed out: It seems Congress has given the administration the power to place conditions on those contracts–and the courts have backed them up. Ann O’Leary, a senior fellow at the Center for American Progress (CAP) senior fellow, notes that “This authority has been used by many presidents for many years.” If these aggressive enforcement and standards-raising actions were combined with effective messaging to scare the hell out of progressives and centrists over the prospect of a GOP and John Boehner take-over, it could conceivably make a difference — although time is running out before November. In his article, “Sweatshop Army: Why does the Pentagon use low-road companies to feed and clothe out troops?,” David Moberg points to the Wornick Company of Cleveland that pays its mostly immigrant work force less than $10 an hour, making it impossible for them to afford the company’s minimum health care plan. “Unfortunately,” Moberg says, “all too often the work on military contracts is ill-paid and abusive, just as it as at Wornick, and not an expression of government’s stated social policy, such as the 1935 Wagner Act’s commitment to encourage collective bargaining.” But more than just raising those contract workers could make a difference. As Demos summarized the authors and their key reform points: Harold Meyerson on the misclassification of regular workers as temporary or contract employees, and the potential impact of a high-profile and systematic enforcement effort targeted at the large companies that employee them. David Moberg on Pentagon contractors that are notorious low-wage employers, and why there is a national security case for government to set and enforce labor standards in defense contracting. This piece looks specifically at the principal contractors producing MREs and military uniforms. David Bensman, Professor of Labor Studies and Employment Relationships at Rutgers University, on federal reclassification of transportation workers and reforming US ports by modernizing safety systems and requiring trucker certification. Steve Franklin on how the Department of Agriculture, which spends upwards of800 million on produce for the school lunch program, can extend bargaining rights to farm workers and sponsor a bill of rights that includes access to sanitary facilities, clean water, and decent housing. Jan Breidenbach on making sure that government-sponsored green housing jobs, which includes the installation of solar panels and retrofitting homes, are high-wage jobs. And others on paying childcare workers a decent wage, insisting on high- quality manufacturing jobs, and the broad social and economic benefits of a high-wage workforce . As a St. Petersburg Times columnist observes: What can be done to undo the damage without legislative action, since Republicans will oppose anything proworker? Kuttner suggests that the most consequential immediate action Obama could take is to start using government’s buying power to reward good labor practices. It must be big-time, governmentwide, and high-profile. One in every four jobs in the economy is influenced by federal procurement, whether it’s foodstuffs for the military or Medicaid payments to nursing homes. Jobs in these industries could be transformed tomorrow if contracts were awarded only to employers who paid living wages, provided benefits, respected labor laws and didn’t interfere with unionizing. As Congress fights over tax breaks for millionaires, the administration could be changing the economic prospects of millions of low-skilled workers. Boosting pay and working conditions for, say, nursing home workers under new Medicaid rules could provide real hope to working poor parents. Yet in the political battles in the run up to the November, the upset victories of some Tea Party candidates in the GOP primaries are adding to the fears of some in the Democratic Party that a mobilized conservative base could trump Democratic arguments that the economy would be worse under the GOP. As Politico reports: Top Democrats are growing markedly more pessimistic about holding the House, privately conceding that the summertime economic and political recovery they were banking on will not likely materialize by Election Day. In conversations with more than two dozen party insiders, most of whom requested anonymity to speak candidly about the state of play, Democrats in and out of Washington say they are increasingly alarmed about the economic and polling data they have seen in recent weeks. They no longer believe the jobs and housing markets will recover — or that anything resembling the White House’s promise of a “recovery summer” is under way. They are even more concerned by indications that House Democrats once considered safe — such as Rep. Betty Sutton, who occupies an Ohio seat that President Barack Obama won with 57 percent of the vote in 2008 — are in real trouble. In two close races, endangered Democrats are even running ads touting how they oppose their leadership. “Democrats kept thinking: ‘We’re going to get better. We’re going to get well before the election,’” said one of Washington’s best-connected Democrats. “But as of this week, you now have people saying that Republicans are going to win the House. And now it’s starting to look like the Senate is going to be a lot closer than people thought.” But some progressives and Democrats are hoping that a more effective message — focusing on part on the consequences of Rep. John Boehner becoming Speaker of the House — might help mobilize voters to resist the upsurge in conservative-driven anger and keep enough Democrats in office. As Washington Post blogger Greg Sargent notes: There’s a reason the White House and Dems are throwing everything they have at John Boehner’s speech attacking Obama’s economic policies: Dems and White House advisers know they must not allow Boehner and the GOP to achieve a clean relaunch of their party and their ideas heading into the midterms. The big underlying fight right now is over whether Republicans will succeed in rebranding themselves, achieving separation from Bush and the party that ran Congress before the Dem takeover, or whether Dems will successfully convince the electorate that a vote for the GOP is a vote for the party that brought our economy to the edge of doom. So the White House is circulating a new set of talking points instructing Dems on the Hill and outside allies to reiterate these ideas: In a speech in Cleveland [this week], House Minority Leader John Boehner laid out Congressional Republicans’ economic dream. Their prescription for the future = the same policies that led to the worst recession since the Great Depression. They want more tax breaks for the rich, less oversight of Wall Street, and a tougher burden for middle-class families… Representative Boehner is ignoring his party’s own record, and he’s hoping that American families will, too. In the eight years before the Obama Administration took office, the Republican Leadership took the record surplus and turned it into a record $1.3 trillion deficit. Their irresponsible policies helped to create the worst economic downturn since the Great Depression, resulting in 22 months straight of job losses across America. Faced with these grim economic numbers, what can Democrats do now to save Congress? A progress writer at Daily Kos, writing under the name Meteor Blades, has some sound suggestions worth considering: To effectively put the Republicans on the defensive, the administration needs more than a message of the-economy-would-be-a-whole-lot-worse if-these-guys-had-been-in-power, even though that assessment is absolutely true. To this end, combined with a thorough thrashing of the GOP for its devil-take-the-hindmost policies, shortly after Labor Day, the administration should present basic elements of a new economic program for the next two years. It should be a program emphasizing our acute emergency, of course. But it should also lay the foundation for resolving some of the chronic problems that helped generate the emergency. That means, as so many critics have said, new approaches to trade, industrial policy, off-shoring, wage stagnation and arbitrage, and regulation. It should also look even deeper, how to deal with people’s needs for economic security in a world in which automation and other productivity-enhancing changes make the old job paradigm obsolete. No way, obviously, can reforms in all those areas be achieved in a mere two years, but a start can be made, a direction laid out. Such an economic program ought also to boast one big project, not just a flashy eye-catcher, but something practical, job-generating and an investment in the future. Replacing all our coal plants with clean-energy sources over a decade would be one possible choice with multiple benefits. But there are others. In the immediate future, these two messages could reinvigorate voters whose enthusiasm for keeping the Party of No out of office has waned during the past few months. Together, they would provide inspiring talking points to activists in the phone-bank and door-to-door trenches for their use in persuading Americans that staying at home, or choosing Republican candidates, will worsen the economic situation. But a far-sighted economic program must ultimately be about something far more important than merely winning an election. Yet given the cautionary tone and policies of the administration so far, even in the face of a continuing economic crisis and looming political disaster, it’s not at all clear such aggressive steps will be taken. UPDATE : There’s mounting evidence, according to the Congressional Budget Office, that President Obama’s stimulus package has had a positive impact on saving and creating millions of jobs. But it’s also transforming the economy, as a new Time magazine article highlights (hat tip to the Daily Beast )—but that reality hasn’t been translated into effective political salesmanship yet. ******************** This article originally appeared in the Working In These Times blog.

Read the full article →

Bob Vermeer: America Plus Exports Equals Prosperity

August 10, 2010

Once again, the American people have it right. The results of a recently released nationwide poll by respected Democratic and Republican pollsters found that Americans view expanding the manufacturing base as the most important tool to creating and stabilizing jobs in our country. And the research backs them up; last week’s Brookings Institute study found that America’s manufacturing base is the most export oriented industry and “increasing the nation’s exports holds out the potential of generating a significant number of good-paying jobs in the United States.” At the same time, President Obama announced the President’s Export Council, as part of his National Export Initiative, to focus on creating 5 million jobs by doubling U.S. exports abroad. Why is that important? At our family business Vermeer Corporation in Pella, IA over a third of our jobs are dependent on international trade – that’s 600-700 of our dedicated people. Countless more local jobs and businesses are positively impacted from the indirect benefits of exporting American goods. Many people don’t realize how easing trade restrictions in places like Korea and China can simultaneously save and create American jobs. Over the next 5 years, almost 90% of the economic growth in the world will take place outside the United States. So if American businesses want to sell equipment, we need to expand our exports under trade agreements that remove barriers to opening markets for our products in other nations. Without new opportunities to sell equipment, the manufacturing workforce will deteriorate even further. The economic crisis we have experienced in the last part of this decade stands in stark contrast to the robust growth and economic prosperity of the U.S. in the 1990′s. Perhaps our elected officials are beginning to recall that one of the major drivers in the previous decade was American exports. Indeed, more than a quarter of all the economic growth we experienced in the 1990′s was directly related to the exporting of American-made products. If the President can meet his goal of doubling U.S. exports in the next five years with the new National Export Initiative, this country will be well on its way to meaningful expansion of the manufacturing base, and stable job growth. This is a good and realistic objective, assuming Congress and the Administration work together on a framework for implementing meaningful trade policies. Asking our policymakers to take an active role in protecting the jobs of millions of American workers by opening closed trading markets across the globe for American-made equipment is far from “any means necessary.” It’s simply the right thing to do. Bob Vermeer, Chairman of the Board of Vermeer Corporation of Pella, Iowa, is a member of the Board of Directors of the Association of Equipment Manufacturers (AEM). Mary Vermeer Andringa is CEO of Vermeer Corporation and a member of the President’s Export Council. AEM is comprised of more than 800 companies and 200-plus product lines in the agriculture, construction, forestry, mining and utility sectors worldwide working to advance the off‐road equipment manufacturing industry in the global marketplace.

Read the full article →

Harold Feld: Baucus Proposes Cutting Broadband Build Out to Fund Tax Credits: Cut Programs That Create Jobs to Fund What Doesn’t?

July 6, 2010

Politicians, news reporters, and now voters have become obsessed with deficit reduction. Unfortunately, this “deficit cutting fever” now threatens the money previously allocated for the broadband stimulus programs. For those unfamiliar with this program, the President announced today that the latest grant awards of $795 million would be matched with $200 million in private investment and create over 5,000 new construction and installation jobs. Oh yes, and it will also bring real high-speed broadband access to a bunch of rural communities the private sector hasn’t wanted to serve. So given a stimulus program that is creating jobs and bringing in new private investment, what will the financial geniuses in Congress do? Ramp up to create more jobs and spur more private investment? Of course not! While that would make sense, it would not fit the current obsession with deficit control by the political and chattering classes. So Senator Max Baucus has proposed cutting approx $300 million from The Department of Commerce’s Broadband Technology Opportunity Program (BTOP) and $300 million from the Department of Agriculture’s Broadband Initiatives Program (BIP) to help fund extensions of unemployment benefits and other more popular stimulus measures such as — surprise! — extensions of various tax credits. (Rep. Obey would cut the same amount, but as part of the supplemental funding for the Afghanistan and Iraq Wars .) While I certainly don’t begrudge extending unemployment benefits (I do think tax credits are rather worthless for motivating corporate behavior in light of how few corporations end up paying corporate income tax ), I absolutely question the wisdom of pulling funding from stimulus programs that are not only creating jobs now, but helping to build infrastructure we need for a productive future. How far we’ve fallen from a year and a half ago when then-Administration broadband spokescritter Blair Levin promised that the $6 billion for broadband stimulus was only a down payment for the Administration’s investment in broadband infrastructure. Now, with the effort to re-purpose the Universal Service Fund for broadband seriously jeopardized , Congress proposes to trim back available money for broadband even further. I know that folks have had criticisms about the program as it unfolded. Heck, I had a bunch of concerns myself about whether BTOP could make a real difference or would end up going the way of most subsidy programs. But in the last year, the program has risen to the challenge and proven itself. Starting virtually from scratch, and overcoming a wide array of technical problems, the Department of Commerce has built a program capable of processing thousands of complex applications. The program has contributed more to fund construction of middle-mile infrastructure , public computing centers , and sustainable broadband adoption than any previous federal program — and with the bulk of money going to public/private partnerships and entities with close ties to state and local government rather than to the traditional large incumbents. (Don’t mean to slight RUS, but I am just not familiar enough with RUS to be able to talk about how they’ve been doing.) Sure, a dollar $600 million cutback is less than 1% of the original program funding. But with studies showing that investment in broadband infrastructure contributes to future GDP growth , Congress shouldn’t cut back at all. To the contrary, now that NTIA has invested so much in creating the program, worked out the implementation bugs, and is pumping needed funds into local communities both rural and urban, Congress ought to expand the broadband stimulus program as an ongoing means of creating jobs today and building a more productive economy for tomorrow. At a minimum, Congress should not skim money that goes directly into local communities and creates infrastructure that will serve us all for a generation in order to fund a bunch of corporate tax credits that seem unlikely to create even a one-time increase in jobs. Granted it’s too much to expect our country to follow the lead of places like Australia, which is investing $43 billion to create a national broadband network . I have sadly come to accept the fact that we are no longer a Great Society that aspires to provide a basic standard of living for all Americans. But do we have to descend to a level of shortsightedness that borders on self-destructive stupidity? If we no longer have the spirit to dare great things, can we at least have the brains not to skim money from programs that directly contribute to our economy and our future to programs that don’t? Fund “incentive tax credits” that don’t work some other way, or don’t fund them at all. But for Heaven’s sake, at least don’t fund them at the cost of programs like BTOP and BIP that actually build something.

Read the full article →

Sen. Blanche Lincoln: The Time Is Now

June 25, 2010

My constituents want Washington to work for us, not the special interests like Wall Street banks. That’s why I stood up for Main Street banks, small businesses and working families in my home state by proposing the toughest reforms for Wall Street of anyone in either party, including the administration. One of my reform proposals would make the $600 trillion over-the-counter derivatives market fully transparent where today it is completely in the dark, with no regulation, no oversight and no public disclosure. Early this morning, the Senate-House Conference Committee on Financial Regulation passed landmark legislation that included the most important provisions of my original proposal. When I first unveiled my plan in mid-April, it was dismissed by many as a political stunt that would never see the light of day. Well, I’ve been underestimated before. What matters to me, and to the retirees, small businesses and local bankers that I represent, is that we expose risky trading by the big Wall Street banks to the light of day. Now my colleagues in the Senate and the House need to know that you stand behind this reform. I have launched a petition and I hope you’ll add your voice to the growing chorus of Americans who support strong financial reform. When my committee, the Senate Committee on Agriculture, Nutrition and Forestry, adopted my bill with bipartisan support, the big banks sent hundreds of lobbyists to Capitol Hill. Most of them promised it wouldn’t be included in the overall Senate Financial Reform bill. When Senate reform became the Dodd-Lincoln Substitute with my derivatives provision intact, there were numerous articles predicting that my provision did not have enough support to defeat amendments to strip it from the bill. However, it’s most significant threat failed with only 39 votes. When the Senate passed comprehensive financial reform with my provision unchanged, the headlines predicted that it would be removed in the conference committee of Senate and House members. This morning, the conference committee ended an all-night session by adopting historic financial reform that offers unprecedented protections for consumers and includes the bulk of my provision. The riskiest trading practices by Wall Street banks that nearly blew up the world economy will have to be moved to an affiliate within two years. While we are changing the way Wall Street does business, the real story is how reform will benefit Main Street by helping families save for college, protect retirees, ensure that small businesses can get loans and most importantly create new jobs. We are not over the finish line. You may still hear opponents using the same tired claims and worn out, catch-all defenses of “unintended consequences” or “driving business overseas” in an attempt to stop our reform efforts. But with momentum on our side, the strong reform that America’s small businesses, community banks, and families need is within our grasp. It’s time we proved the naysayers wrong once again and pass historic financial reform. I hope you add your name to the petition today so that my colleagues in Washington know you want to change the financial system so families have the protections they deserve.

Read the full article →

India Microfinance Evokes Risk of Subprime in the East as SKS Prepares IPO

June 14, 2010

By Ruth David June 15 (Bloomberg) — Savita Ramesh Rathore stood at the door to her dimly lit workshop in Mumbai’s Dharavi slum, filled floor-to-ceiling with bundles of old clothes, and tallied up the cost of her son’s wedding last year. “Jewels, clothes, food, the town hall,” said Rathore, 50, who makes towels from discarded clothes. She borrowed 30,000 rupees ($645) from moneylenders charging 60 percent interest and took additional loans from friends to pay for the wedding. Three months ago, she got a 10,000 rupee loan from urban lender Hindusthan Microfinance Pvt. to repay some of that debt. Rathore is one of 25 million Indians who have taken so- called microfinance loans, often without adequate documentation or collateral, according to Micro-Credit Ratings International Ltd. As Hyderabad-based SKS Microfinance Pvt. plans to become the first such lender to go public in the country, an industry credited with helping alleviate poverty may come under pressure to tighten loan standards to avoid a pile-up of bad debts. “Globally, microfinance is showing characteristics of the western financial markets before the collapse,” said Sanjay Sinha , managing director at Micro-Credit Ratings in New Delhi. “In the U.S., homeowners were given loans at 120 percent of the value of their properties. In rural India, people are being lent to at 150 percent of the value of their enterprises.” The implosion of the U.S. market for subprime mortgages to people with poor credit histories helped trigger a financial panic and almost $1.8 trillion in losses and writedowns at financial institutions worldwide. Nicaragua Crisis Microfinance, which focuses on loans in poor areas largely shut out from traditional banking services, gained prominence globally when Muhammad Yunus won the Nobel Peace Prize in 2006 for his role in founding Bangladesh’s Grameen Bank. Yet the past two years have been marked by surging defaults in some countries. Microfinance markets in Nicaragua, Morocco and Pakistan have seen default levels climb to more than 10 percent, the threshold that marks a “serious repayment crisis,” according to a February report from Washington, D.C.-based policy and research firm Consultative Group to Assist the Poor . Delinquencies in Bosnia and Herzegovina stayed below that level only because of “aggressive loan write-offs,” the report said. While there has been no evidence of a “widespread repayment crisis” in India, “a number of industry analysts have highlighted industry vulnerabilities,” the report said . Indian microfinance firms have reported bad-loan ratios of about 2.5 percent on average, Micro-Credit’s Sinha estimated. Actual levels may be higher, in part because some lenders roll over loans to struggling borrowers to avoid defaults, he said. World’s Largest Market Most microfinance loans in India range from 5,000 rupees to 20,000 rupees, according to an October 2009 report by Crisil Ratings, the local unit of Standard and Poor’s. The country, where more than 600 million people live on less than $1.50 a day, is the world’s largest microfinance market, according to a March report by CGAP and JPMorgan Chase & Co. Interest rates range from 18 percent to 33 percent, according to Vijay Mahajan, chairman of Hyderabad-based Basix Group and president of the Microfinance Institutions Network, an industry lobbying organization. Indian banks typically don’t lend directly to microfinance customers. Microfinance lending in India may surge by about 40 percent annually over the next few years, said Sinha, whose company provides ratings services to potential investors. Sequoia Backing SKS, betting the potential for growth will attract investors, sought approval from India’s capital markets regulator in March for an IPO and picked Kotak Mahindra Capital Co., Citigroup Inc. and Credit Suisse Group AG to manage the offering. The company hasn’t said when it will sell stock. Sequoia Capital, one of Google Inc. ’s and Yahoo! Inc.’s early investors, began buying shares in SKS in March 2007. It plans to sell less than a third of its holding in the IPO, according to the filing SKS made in March. “The market is only 15 percent to 20 percent penetrated today,” Sumir Chadha , managing director of Sequoia Capital India, said in a May 6 interview. “So even though microfinance has been growing at stupendously high growth rates for the last four to five years since we first invested in the sector, we expect it to continue to grow at very high rates for the foreseeable future.” SKS, which mainly provides loans to poor women in rural areas, said its number of borrowers climbed almost 20-fold to 3.95 million in the three years ended March 31, 2009. Loans outstanding increased more than 18 times in the period, to 14.2 billion rupees, and profit jumped almost 49 times to about 802 million rupees, SKS said in the March filing. Commitment Vikram Akula , SKS’s founder and chairman, sold all his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million on Feb. 10, according to the filing. Akula, a U.S. citizen, was paid 7 million rupees in salary for the fiscal year through March 2009 and holds 2.68 million stock options that he agreed not to sell within three years from the listing. “While there is nothing legally wrong in the encashment process, it does raise a larger question” about executives’ commitment, M.S. Sriram, a former professor at the Indian Institute of Management-Ahmedabad, wrote in a working paper published in April. Akula and senior SKS executives who have sold their holdings declined requests for interviews, spokesman Atul Takle said, citing a “quiet period” before the IPO. Runaway growth at microfinance companies masks an erosion of lending standards and a lack of regulation that may help spark rising defaults, said Micro-Credit’s Sinha. India doesn’t have a nationwide system for tracking borrowers’ credit histories, making it hard for lenders to check whether clients have multiple loans. IPO ‘Inevitable’ Increased regulation may force lenders to boost provisions, hurting profits, said Sandip Sabharwal , head of portfolio management services at Mumbai-based Prabhudas Lilladher Pvt. If “there is more transparency, whether profitability will be the same remains to be seen,” he said. “From an investor standpoint, the risk is that the huge profitability we see today may not remain going forward.” More microlenders will likely tap equity markets, said Basix Group ’s Mahajan. Until now, they have relied on loans and grants from banks, insurers and foundations for funding, he said. “An IPO is inevitable for any microfinance company that has crossed a certain size,” Mahajan said. “The money needed to maintain capital adequacy standards and finance future growth at that point is too much to expect from just the banks or private equity investors.” IPO Candidates Basix, which focuses on poor households in rural areas and provides loans averaging about 3,000 rupees, may sell shares in an IPO next year, he said. Spandana Sphoorty Financial Ltd. , Share Microfin Ltd., Bandhan Financial Services Pvt. and Asmitha Microfin Ltd. are among rivals likely to consider selling stock this year because of their size, Mahajan said. While raising money from private equity investors is an option, “we are also keen to tap the stock markets by listing shares,” Padmaja Reddy, managing director of Spandana, said in an e-mail. Vidya Sravanthi, managing director of Asmitha Microfin, said in an e-mail that the company may seek a listing, “but not this year.” Udaia Kumar, managing director of Share Microfin , and Bandhan Managing Director Chandra Shekhar Ghosh didn’t return calls seeking comment. ‘Irrational Exuberance’ “There is significant investor interest in microfinance companies’ public issues, but it’s being driven by irrational exuberance,” said Sinha. “Investors aren’t fully factoring in the risks involved in unsecured lending to an over-marketed segment that also becomes politically charged at election time.” Former Finance Minister Palaniappan Chidambaram in February 2008 announced a $15 billion waiver for farmers’ debts, seeking to shore up rural support before general elections. The move was partly in response to almost 200,000 suicides among Indian farmers since 1998. “Rural lending is more difficult than urban lending,” said Amit Kalokhe, a loan officer at Mumbai-based Hindusthan Microfinance. “If there’s a bad monsoon and the farmers lose their crops, our money can go along with it that year.” Hindusthan Microfinance tries to reduce risk by making borrowers pay an 8 percent deposit and lending to groups of people rather than to individuals, founder Anil Jadhav said in an interview in Mumbai. “That way, if one person defaults, others can pay the amount,” he said. The 10,000 rupee advance to towel maker Rathore in Mumbai was part of a loan to a group of women, according to the company. Credit Bureau Another proposed safeguard is the Microfinance Institutions Network, which was set up by the largest microlenders in India and represents almost 80 percent of the industry, according to a March 9 statement from the organization. The entity, whose board includes Basix’s Mahajan and SKS Microfinance Chief Executive Officer Suresh Gurumani, created a credit bureau to improve risk management and “ensure multiple borrowing and over indebtedness is checked,” the release said. Lenders’ efforts at self-regulation may not be enough, said Ramraj Pai, a director at Crisil. “Central regulation is critical for the continued growth of the industry and to open new doors for funding,” Pai said. In March 2007, the government proposed the Micro Financial Sector (Development and Regulation) Bill in the lower house of parliament, seeking to strengthen oversight. Lapsed Bill Under the bill, the National Bank for Agriculture and Rural Development would oversee the industry, and microfinance companies would be forced to set aside 15 percent of profit each year as reserves. The legislation lapsed when parliament was dissolved before the 2009 federal elections. As the push for greater state oversight stalls, Rathore is already mulling how to finance the next major outlay: her 19- year-old daughter’s wedding. “Once my present loans are paid off, I know there will be more,” Rathore said from the doorstep of her workshop, looking past the open sewage drains at the two-room home with a tin- sheet roof that she shares with four family members. “The cycle doesn’t end.” To contact the reporter on this story: Ruth David in Mumbai at rdavid9@bloomberg.net

Read the full article →

Worst Locust Plague in Two Decades Threatens Crops in Australia’s Victoria

June 11, 2010

By Wendy Pugh June 11 (Bloomberg) — The worst locust plague in more than two decades is threatening to strike Australia, the world’s fourth-largest wheat exporter, after rainfall boosted egg-laying by the insects in major crop growing regions. “There are hundreds of millions of dollars worth of crops and pastures that are potentially at risk,” Chris Adriaansen, director at the Canberra-based Australian Plague Locust Commission said in an interview by phone. “Tens of millions of dollars” will be spent during the southern hemisphere spring to reduce the affects of the infestation, he said. The forecast plague could cost Victoria’s agriculture sector A$2 billion ($1.7 billion) if left untreated, the state government said today. Widespread egg-laying across south- eastern Australia has set the scene for the biggest hatching for at least 25 years, according to the commission, which describes locusts as the nation’s most serious pest species. “The advice of leading scientists indicates the scale of the coming spring’s outbreak could be as bad as we experienced in 1973 and 1974 when locusts swarmed through much of Victoria,” state premier John Brumby said today in a statement. “Prior to that, the last outbreak of this scale was in 1934, so we could be facing a once-in-a-lifetime locust plague with locusts swarming right across the state.” Locusts are expected to hatch from August to October in Victoria, New South Wales and South Australia states, according to the commission. The first-generation spring hatching alone could occur over a total area of 1.8 million hectares (4.4 million acres), the commission’s Adriaansen said. ‘Knock Down’ “Egg-laying has happened so it is a case of being prepared to try and knock down their numbers come September,” Victorian Farmers Federation President Andrew Broad said by phone from Bridgewater. The VFF, NSW Farmers Association and South Australian Farmers Federation have asked the federal government for additional funding to help farmers fight the insects. The Victorian government said it will spend A$43.5 million to fight the locusts, which belong to the same order of insects as grasshoppers. Rabobank Groep NV in April raised its wheat- output forecast for Australia to 21.8 million metric tons, little changed from last harvest, after the rains. Australian farmers have mostly completed planting of winter crops including wheat and canola, with final output depending on favorable weather through the remainder of the year. Aerial pesticide spraying and ground-level controls by agencies and growers is planned to curb the spread of the locusts and reduce damage to crops and pastures, according to the commission Damage Potential Locusts can cause widespread and severe damage to pastures, cereal crops and forage crops, according to the Department of Agriculture, Fisheries and Forestry website. A swarm may contain millions of locusts covering several square kilometers and overnight migrations of as much as several 100 kilometers are not uncommon, it said. The earliest record of an Australian swarm is from 1844. High density swarms, with more than 50 insects in a square meter, can eat 20 metric tons of vegetation a day, according to a South Australian primary industries website . “If we get a massive hatching like they are expecting in spring then what the grasshoppers will do is go into the crops and start chewing the heads off the wheat,” said Mark Hoskinson, who farms 2,500 hectares at Kikoira in New South Wales. Locusts decimated a crop sown by his grandfather after drought in the 1940s and this year’s threat follows recovery from dry weather. ‘Massive Hatching’ “We have experienced 10 years of drought and the last thing we need is a crop failure due to grasshoppers,” said Hoskinson, also chairman of the NSW Farmers Association’s grains committee. “We really need growers to be on the lookout.” Analysis showed every dollar spent by the commission on early intervention saved more than A$20 of later damage, the commission’s Adriaansen said. To be sure, experience from past infestations suggested widespread crop damage from this year’s outbreak would be limited, according to analysts including Commonwealth Bank of Australia agricultural commodities strategist Luke Mathews . “It is something that bears watching but I don’t think it is a significant factor in the minds of traders at the present stage,” Mathews said. “Weather conditions first and foremost dictate the size of the Australian wheat crop and winter crop production in total.” Wheat production this harvest could drop below 20 million metric tons or rise or more than 23 million tons, depending on weather, Mathews said. The bank is forecasting a crop of 20 million to 21 million tons. Output last season was 21.66 million tons, the Australian Bureau of Agricultural and Resource Economics estimated in March. Aerial Spraying State agricultural departments are urging farmers to report and mark signs of infestations so that locust numbers can be reduced before they take flight. Some early-planted winter crops in eastern Australia were re-sown because of locust damage. The plague locust commission, established in 1974 after a plague the previous year, organizes aerial spraying while locusts are at the nymph stage to curb swarming across eastern Australia and reduce damage from further insect generations over the following months. State and regional government agencies also work with farmers on ground-level action to protect local areas and individual properties. The situation and prevention measures are being monitored by GrainCorp Ltd. , eastern Australia’s largest grain handler, spokesman David Ginns said. “GrainCorp has confidence in the competence and effectiveness of the state and commonwealth authorities that have a lot of experience in dealing with locust situations of this type,” he said. Problem Recognized Problems during planting had alerted authorities and farmers to the potential size of the spring hatching and increased the chance that damage would be contained, Rabobank Sydney-based agricultural commodities analyst Wayne Gordon said. “The potential for that problem in the springtime has been recognized and we are fairly confident the authorities will get that under control as they have done in the past,” he said by phone. Rabobank’s wheat forecast for 21.8 million tons had potential “upside,” depending on seasonal conditions, he said. To contact the reporter on this story: Wendy Pugh in Melbourne wpugh@bloomberg.net

Read the full article →

Food Regulation Needs Single U.S. Agency for Greater Safety, Report Says

June 8, 2010

By David Olmos June 8 (Bloomberg) — Food safety in the U.S. would improve if a single agency were responsible for oversight of produce, poultry and meat, a report ordered by Congress said. The Food and Drug Administration, which monitors 80 percent of the U.S. food supply, should create a single food-safety agency and establish a formal system for evaluating which issues pose the biggest risk to public health, the Institute of Medicine, an independent group that is part of the National Academy of Sciences , said today in its report . FDA Commissioner Margaret Hamburg has made the curtailment of food-related illnesses a focus of agency efforts after a White House task force called for more inspections of processing plants and better surveillance. The agency has been criticized for failing to adequately monitor food suppliers and distributors and not doing enough in advance to prevent outbreaks, according to the IOM report. Last month, the FDA announced recalls of shredded lettuce linked to at least 26 E. coli-related illnesses in five states and alfalfa sprouts now linked to 35 cases of salmonella in 11 states. The FDA “lacks a comprehensive, systematic vision for a risk-based food safety system,” according to the institute report. The agency has made “limited progress” in developing a method for measuring how well it is doing at improving food safety, the report said. The FDA shares responsibility for food safety with the U.S. Department of Agriculture , which oversees meat and poultry. Unify Efforts The U.S. should “move toward the establishment of a single food safety agency to unify the efforts of all agencies and departments with major responsibility for the safety of the U.S. food supply,” the report said. About 5,000 Americans die from food-borne illness each year and more than 300,000 are hospitalized, according to the Atlanta-based Centers for Disease Control and Prevention. The Government Accountability Office, the investigative arm of Congress, last month said the FDA’s effort to protect the country’s food has been hampered by gaps in scientific research at the agency. Legislation approved last year by the U.S. House of Representatives would among its provisions give the FDA enhanced authority over imported food. A Senate version of the bill is awaiting a vote. The National Academy of Sciences serves as an advisory group to the U.S. government on scientific and technological issues involving policy decisions. To contact the reporter on this story: David Olmos in San Francisco at dolmos@bloomberg.net

Read the full article →

Coast Guard Opens Own Suggestion Box for Oil Cleanup as Well Keeps Gushing

June 4, 2010

By Pat Wechsler June 4 (Bloomberg) — The U.S. Coast Guard is creating a panel to look into proposed technologies and products to clean up the Gulf of Mexico oil spill, concerned that BP Plc ’s multistage suggestion box system isn’t working. The new group will evaluate ideas that deal with detecting oil in the ocean, cleaning it up and restoring the environment, said Commander Howard Wright, a Coast Guard spokesman. The panel will be independent of BP’s online efforts to assess ideas. The spill is leaking an estimated 12,000 to 19,000 gallons of oil into the Gulf each day, a government panel said. The decision follows a report by Bloomberg News that London-based BP has so far tested only four of almost 35,000 ideas submitted and implemented none. The panel will bring proposals that may have the fastest impact on the spill to the immediate attention of the government response team headed by Admiral Thad Allen that is handling the disaster, Wright said. “There has been a lot of concern that there are significant ideas not getting full voice,” Wright said today in a telephone interview. “The government wanted to make sure that all the best technology is being applied and there was good oversight of that process.” The new group will include representatives from the Coast Guard, National Oceanic and Atmospheric Administration, Department of Interior, Environmental Protection Agency and Department of Agriculture, Wright said. April 20 Explosion The spill was caused by an April 20 explosion aboard the Deepwater Horizon rig, which London-based BP leases from Switzerland’s Transocean Ltd. The blast killed 11. The Interagency Technology Assessment Program, as the new group is being called, today will put out a request for proposals from companies, scientists and engineers. The ideas must be summarized in six pages. Wright said the government will be looking for “significant rigor and a significant amount of validation with these proposals.” BP’s effort asked for a 200-word description of a proposed solution. BP spokesmen didn’t immediately return phone calls for comment today. The new panel will be aided by scientists and engineers at the Coast Guard’s Research Development, Testing and Evaluation Program . A representative from the Coast Guard’s research development center will be on site when the panel meets to take ideas of “immediate benefit,” particularly involving cleaning up the spill, directly to the incident command, Wright said. Latest Ideas “We wanted to keep the interagency group plugged in to the command to make sure we are using the latest ideas,” he said. While BP is responsible for stopping the flow, its failure to do so after seven weeks has prompted the government to make more demands and seek its own solutions. Allen in recent days ordered BP to pay for the construction of six barrier islands as buffers to keep as much oil as possible away from fragile coastal marshes and wetlands. The EPA also met with 20 scientists and movie director James Cameron on June 1 in search of potential methods to cap off the oil gushing from the damaged well. Cameron was invited because of his work with underwater remote vehicles for the filming of the 1997 movie “Titanic.” “This is something that has to be dealt with immediately, not sometime later,” President Barack Obama said May 28. Ideas to BP The ideas that have been submitted to BP range from soaking up the oil with human hair to oil-eating microbes to blasting the well closed with nuclear weapons, and while many of them are duplicative, unworkable or even dangerous, about 800 have been categorized as feasible and may be tested. BP set up a four-stage evaluation system that involves dozens of engineers from within the company and some hired on a contract basis. Proposals are reviewed to see if they are feasible and then whether they are proven to work. One of the four technologies to move forward is centrifuge equipment, an example of which was developed by actor-director Kevin Costner . The machines built by Ocean Therapy Solutions Inc., a company owned by the “Waterworld” and “Dances with Wolves” star and his scientist brother Dan, use barge-based turbines to spin as much as 200 gallons of water a minute in such a way that oil is separated out. Costner unveiled the centrifuges at an offshore technology conference 10 years ago, where several of the BP executives working on the spill now were in attendance. After some preliminary testing on land, the centrifuges were given the go- ahead to test in open water this week. To contact the reporter on this story: Pat Wechsler in New York at pwechsler@bloomberg.net

Read the full article →

Chicken Farmers Decry "Indentured Servitude," Industry Monopolization, In Hearing

May 24, 2010

NORMAL, Ala. — Alabama chicken farmer Garry Staples told federal officials Friday that there’s no open market in the poultry industry. The 57-year-old farmer from Steele raises birds for Pilgrim’s Pride, one of the nation’s biggest poultry companies. But like other farmers who raise most of the chickens Americans eat, he doesn’t own the birds he raises, nor does he determine what food they eat or medicine they get. Pilgrim’s Pride controls that. Staples joined dozens of other chicken farmers who traveled to Alabama A&M University for a hearing the U.S. Departments of Justice and Agriculture held on competition in the chicken industry. Although they raise birds for different companies, the farmers said they have little power to negotiate with the businesses that control an increasingly consolidated industry. Staples and other farmers said they have been putting up with more demands and smaller payments from the poultry companies. In some regions, farmers only have one or two potential buyers, so it’s hard to make demands. Staples owes more than $1 million on his farm, and he doesn’t want to upset Pilgrim’s Pride. “The chicken companies know they don’t have to treat you fairly,” Staples said. Richard Lobb, a spokesman for the National Chicken Council trade group, responded that Friday’s hearing was skewed with testimony from unhappy farmers and many are satisfied with contracts that allow them to sell a steady supply of chickens.” “The processing plant has to have birds coming in. They’ve got to continue working with farmers in that area to secure a supply of birds. (Companies) are not going to cut off their nose to spite their face,” he said. Friday’s hearing was the second of five workshops that the Obama administration will hold this summer and fall to examine competition in agriculture, where seed, cattle, chicken and hog markets are dominated by a few large corporations. U.S. Attorney General Eric Holder and Agriculture Secretary Tom Vilsack, who both attended the hearing, said stepped up antitrust enforcement in agricultural businesses is a top priority for the Obama administration. If that happens, farmers might earn more, but food prices might also increase. Holder suggested during a news conference that the Justice Department hasn’t been vigilant enough in pursuing antitrust cases against big poultry companies. “There is a new attitude in the antitrust division,” Holder said. “Everyone should understand. There is no hesitancy on the part of this antitrust division, in this administration, to take action where we think it is needed. This antitrust division is open for business again.” Kay Doby, a former chicken farmer from North Carolina, said government intervention is long overdue. Companies lure farmers into borrowing money to build chicken houses, then threaten to cancel their contracts if farmers complain about pay or refuse to invest more money to upgrade the buildings, she said. “This system takes hardworking farmers and makes them indentured servants on their own land,” Doby said. “I can’t tell you how many times I’ve heard that our contract would be canceled if we did such and such.” Friday’s hearing was packed with farmers, lobbyists and agribusiness representatives who are keeping a close eye on the hearings, eager to see what new rules or federal lawsuits might result. It’s not clear that stepped up antitrust enforcement would do anything to change the broader food system. Chicken companies have developed their contracting system over decades, and it has survived antitrust lawsuits and challenges in the past. Vilsack said the USDA could use its regulatory power to complement the Justice Department’s antitrust efforts. The department is getting more money to hire lawyers and investigators and has formed a joint task force with the Justice Department to coordinate antitrust enforcement. The industry says existing antitrust law is adequate and opposes more regulation, but the political pressure to do something seems to grow at each hearing. Staples, the 57-year-old Alabama poultry farmer, said he feared Pilgrim’s Pride would retaliate against him for his testimony, a notion that made the Army veteran choke up during his testimony. “I appreciate y’all coming,” he said to Holder and Vilsack. “And I hope y’all helps.”

Read the full article →

Senate Democrats Said to Have Votes to Advance Wall Street Overhaul Bill

May 20, 2010

By Alison Vekshin and Phil Mattingly May 20 (Bloomberg) — Senate Democrats have the 60 votes needed to approve a procedural motion today aimed at moving the financial-regulation bill toward a final vote, according to a leadership aide. A procedural vote on the sweeping overhaul of Wall Street oversight failed yesterday. The Democrats scheduled a second try for 2:30 p.m. today Washington time. They need at least two more yes votes to reach the threshold of 60 required to wind down debate. A leadership aide who spoke on condition of anonymity said those votes appeared to be in hand. Senator Christopher Dodd said yesterday that he was confident “there will be the necessary votes to allow us to have a final vote on the passage of this legislation.” Two Democratic senators who said the bill wasn’t strong enough — Maria Cantwell of Washington and Russell Feingold of Wisconsin — joined Republicans yesterday in blocking the first attempt to advance the bill. Democrats won votes from the two Maine Republicans, Olympia Snowe and Susan Collins . Dodd, the Connecticut Democrat who wrote the regulatory bill, said he expected Senator Arlen Specter , a Pennsylvania Democrat who was absent from yesterday’s vote and lost his bid for his party’s nomination, to support the cloture motion. That would mean Democrats will need to peel off another Republican vote or persuade Cantwell or Feingold to switch. Yesterday’s vote on the cloture motion by Senate Majority Leader Harry Reid of Nevada surprised lawmakers from both parties who expected the move to succeed after two weeks of debate on amendments from both sides of the aisle. When Democrats fell two votes short, Reid switched his vote to no for parliamentary reasons so he could move for reconsideration. The final tally was 57-42. ‘Needs More Work’ The rejection emboldened some Republicans who had argued the bill was being moved too quickly. “I am pleased many of my colleagues from both sides of the aisle agreed the current bill needs more work,” Senator Mike Johanns , a Nebraska Republican, said in a statement. “This bill wreaks havoc on legitimate risk management, ignores ongoing problems with Fannie Mae and Freddie Mac, and creates a massive new bureaucracy that will impair credit on those that had no role in the crisis.” The vote also was a blow to President Barack Obama , who has pressed Congress to approve the financial-rules overhaul he proposed in June. If the Senate bill is approved, it would have to be reconciled with a House plan passed in December before Obama can sign it in into law. Treasury Statement “Action on a comprehensive financial reform is long overdue, and the American people have a right to expect that the Senate will bring its work to a conclusion right away,” Treasury Department spokesman Andrew Williams said yesterday in an e-mailed statement. Cantwell said her vote on cloture was contingent on consideration of an amendment that would bar swaps dealers from trading contracts that have been rejected by a clearinghouse. “There’s lots of amendments I’d like to offer, but this one is so critical to having a clear transparent marketplace that I couldn’t see moving ahead without getting a vote on it,” Cantwell told reporters after the vote. Feingold, in a statement after the vote, said: “We need to eliminate the risk posed to our economy by ‘too-big-to-fail’ financial firms and to reinstate the protective firewalls between Main Street and Wall Street firms.” The collapse of a compromise on derivatives language, one of the remaining contentious issues, was another setback for Democrats yesterday. $615 Trillion The legislation would push most of the $615 trillion in over-the-counter derivatives to be processed, or cleared, with a third party. Regulators would also be required to impose heightened capital requirements on companies with large swaps positions, and limit the number of contracts a single trader can hold. Derivatives are contracts whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or weather. Dodd also failed to reach a compromise on the derivatives language in the bill, something he aimed to address through an amendment that would have shelved a rule that would force banks including Goldman Sachs Group Inc. and Bank of America Corp. to move their swaps trading desks to subsidiaries. Dodd, chairman of the Senate Banking Committee, decided not to offer an amendment that would have delayed the measure’s implementation pending a study of its effects by a new council of regulators, spokeswoman Kirstin Brost said yesterday. Swaps-Desk Rule The swaps-desk rule was crafted by Senator Blanche Lincoln, an Arkansas Democrat who leads the Agriculture Committee, as part of her larger plan to strengthen derivatives oversight. Losing bets on swaps tied to mortgage-backed securities pushed New York-based insurer American International Group Inc. to the brink of bankruptcy when the U.S. housing market collapsed in 2008. Lincoln, who has said she will fight efforts to strip the swaps-desk provision, got help from colleagues and the banking industry in keeping Dodd’s amendment off the Senate floor. Senate Republicans and the largest Wall Street banks argued that Dodd’s amendment might prove more onerous than Lincoln’s language, given the uncertainty it would cause in the market during the study period. Senators have been debating and amending Dodd’s proposal, aimed at preventing a repeat of the financial crisis that forced the government to extend $700 billion in bailout funds to banks including Citigroup Inc. and Bank of America. Consumer Bureau The regulatory bill would create a consumer financial- protection bureau at the Federal Reserve, overhaul rules for hedge funds and derivatives, and create a mechanism for dissolving failed firms whose collapse would roil the economy. In other action yesterday, the Senate rejected, in a 60-35 vote, a measure offered by Senator Sheldon Whitehouse , a Rhode Island Democrat, that would have forced credit-card issuers to abide by state limits on interest rates. The Senate also approved by voice vote a Snowe amendment that would require the consumer protection bureau to consider the economic impact of its rules on small businesses. To contact the reporters on this story: Alison Vekshin in Washington at avekshin@bloomberg.net . Phil Mattingly in Washington at pmattingly@bloomberg.net .

Read the full article →

Hunger Feeds Philippine Rebellions as Candidates Play Food Card for Votes

May 7, 2010

By Luzi Ann Javier May 7 (Bloomberg) — Ricardo Istacion said he had the best meal of his life on April 19, feasting on fish, chicken and pork at a party thrown by Philippine presidential candidate Joseph Estrada to celebrate his 73rd birthday. “Most days, we just have rice porridge,” said Istacion, a 54-year-old widower and father of two who collects recyclable waste at the garbage mountain in the Payatas district of Manila. Estrada “really loves Payatas, and for that I will vote for him.” While filling empty bellies helps win votes, politicians have failed to keep them full once in power. Whoever wins in the May 10 election will inherit hunger and unemployment that is fueling communist and Muslim insurgencies, perpetuating the Philippines’ status as a perennial economic underachiever. “If things are really deteriorating then it’s a risk that investors will move on to more attractive destinations,” said Tim Condon , Singapore-based chief Asia economist at ING Groep NV. “Patience isn’t unlimited.” The Jakarta Composite Index has risen more than 160 percent in the past five years, while the Philippine benchmark gained less than 70 percent. Moody’s Investors Service rates Indonesia, which was bailed out by the International Monetary Fund in 1998, one level higher at Ba2 than the Philippines. Corruption, mismanagement and a threefold jump in the population have eaten away at an economy that was Southeast Asia’s biggest in the 1960s. It has now been outstripped by Indonesia, Malaysia, Thailand and Singapore. Corruption Index Corruption means money for roads and other infrastructure goes missing. An average of 20 percent to 30 percent of every contract is lost to graft or inefficiency, the World Bank said in a 2008 study . The Philippines slipped in last year’s Transparency International Corruption Perceptions Index to 139th place from 131st in 2007. Indonesia rose to 111th from 143rd, according to the Berlin-based watchdog’s website. Estrada, who was convicted of corruption in 2007 and later freed by a presidential pardon, was vying for second place with Senator Manuel Villar , 60, in a poll published today by BusinessWorld newspaper. Estrada had 20 percent and Villar 19 percent, while Benigno Aquino , son of a former president, led with 42 percent, according to the survey of 2,400 adults. It was conducted May 2 to May 3 and had a margin of error of 2 percentage points. Feeding Itself One of the biggest challenges facing the winner is the nation’s inability to feed itself. The Philippines has gone from being an occasional net exporter of rice before 1988 to become the world’s biggest importer as yields stagnated, according to U.S. Department of Agriculture data. Indonesia is now self- sufficient in rice, after importing 5.77 million tons in 1998. Philippine farmers are forecast to produce on average 3.6 tons of rice a hectare, compared with 5 tons per hectare in Indonesia, the USDA website shows. The government of outgoing President Gloria Arroyo , 63, says it spent almost all of the 12 billion pesos ($268 million) it budgeted to fix irrigation systems and boost harvests. Jimmy Tadeo, Manila-based head of a 20,000-strong farmers’ group, said he had seen no evidence of this work on recent tours of rice- growing regions. ‘Romancing the Data’ “The government is romancing the data,” Tadeo said. “If they had actually spent all that 12 billion pesos in irrigation, we would be self-sufficient in rice.” The country’s lowest rice yields are in the southern island of Mindanao, where U.S. Special Forces are helping fight Muslim and communist insurgencies. Mindanao is home to the al-Qaeda- linked Abu Sayyaf and the communist New People’s Army, both branded terror organizations by the U.S. The 2.9 tons a hectare eked out by the island’s farmers helps explain per capita income of less than $1 a day. The Philippine regions most vulnerable to armed conflict were those with the lowest incomes and poorest education, the United Nations said in a 2005 report . Failure to deliver more rapid economic growth means the country’s new president will face a growing wave of unemployment. The working-age population is forecast to jump 52 percent between 2005 and 2030, according to Jesus Felipe , principal economist at the Asian Development Bank in Manila. Jobless Rate While the official jobless rate rose to 7.3 percent in January from 7.1 percent in October, the National Statistics Office estimated that only 64.5 percent of the people of working age are actually employed. That puts even the government’s subsidized rice beyond the means of many, increasing the value of a free meal from a politician. The number of Filipino households who had nothing to eat at least one day in a quarter rose to a record 24 percent, according to a survey released Jan. 12 by Social Weather Stations , a Manila-based researcher. Demand for rice from government stockpiles jumps in the run-up to elections, data from the National Food Authority show. In the five months to May 1998, when Estrada won the presidency, rice releases from state supplies jumped almost five-fold. The 207,125 tons of rice released in March this year were the highest for that month since at least 1991. “When you have a situation where people really have nothing, they become easy prey to these kinds of tactics,” said Rey Trillana , a fellow at the Center for Civic Education and Democracy in Manila. To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

Read the full article →

FDIC Head Sheila Bair: Let Banks Keep Derivatives

May 1, 2010

WASHINGTON — A top government banking regulator wants Senate Democrats to let banks keep most of their business in complex – and profitable – securities known as derivatives. A sweeping overhaul of banking regulations pending in the Senate would require banks to spin off their derivatives business. Sheila Bair, the chairwoman of the Federal Deposit Insurance Corp., said that provision could shift the creation of derivatives contracts outside the reach of regulators. “If all derivatives market-making activities were moved outside of bank holding companies, most of the activity would no doubt continue, but in less regulated and more highly leveraged venues,” Bair wrote in a letter to Senate Banking Committee chairman Christopher Dodd, D-Conn., and Agriculture Committee Chairwoman Blanche Lincoln, D-Ark. A copy of the letter was obtained by the Associated Press. The derivatives measure, pushed by Lincoln, would require banks to set up separate subsidiaries, with their own source of capital, to run what has been a highly profitable derivatives business. Derivatives are the exotic speculative and risk-hedging instruments blamed for helping plunge Wall Street into a near meltdown in 2008. The Obama administration has also indicated it does not support the provision. The FDIC is at least the second bank overseer to oppose the ban. Federal Reserve officials, in a letter to senators, also have called on the Senate to remove the spin-off requirement. Dodd agreed to keep that restriction after negotiating with Lincoln last weekend. The decision stunned the bank industry, which immediately mobilized to get it removed. But even if that provision is ultimately removed, there is bipartisan support for restricting banks from trading in derivatives with their own accounts for purely speculative purposes. Indeed, in her three-page letter, Bair said that neither banks nor bank holding companies should engage in speculative derivatives trading. But she said banks have a legitimate need of derivatives to help them hedge against interest rate fluctuations. Moreover, she said, banks “play an essential role” creating markets for commercial firms that enter into derivatives contracts to manage their risks. The value of derivatives depends on the price of some underlying asset. Corn futures and stock options are examples of some of the simpler derivative products. Bair said that even if banks created subsidiaries for their derivatives business, those entities would be outside the FDIC’s scrutiny. “We do not have the same comprehensive backup authority over the affiliates of banks as we do with the banks themselves,” she wrote. Representatives from Dodd’s and Lincoln’s offices were not immediately available to comment.

Read the full article →

FDIC Head Sheila Bair: Let Banks Keep Derivatives

May 1, 2010

WASHINGTON — A top government banking regulator wants Senate Democrats to let banks keep most of their business in complex – and profitable – securities known as derivatives. A sweeping overhaul of banking regulations pending in the Senate would require banks to spin off their derivatives business. Sheila Bair, the chairwoman of the Federal Deposit Insurance Corp., said that provision could shift the creation of derivatives contracts outside the reach of regulators. “If all derivatives market-making activities were moved outside of bank holding companies, most of the activity would no doubt continue, but in less regulated and more highly leveraged venues,” Bair wrote in a letter to Senate Banking Committee chairman Christopher Dodd, D-Conn., and Agriculture Committee Chairwoman Blanche Lincoln, D-Ark. A copy of the letter was obtained by the Associated Press. The derivatives measure, pushed by Lincoln, would require banks to set up separate subsidiaries, with their own source of capital, to run what has been a highly profitable derivatives business. Derivatives are the exotic speculative and risk-hedging instruments blamed for helping plunge Wall Street into a near meltdown in 2008. The Obama administration has also indicated it does not support the provision. The FDIC is at least the second bank overseer to oppose the ban. Federal Reserve officials, in a letter to senators, also have called on the Senate to remove the spin-off requirement. Dodd agreed to keep that restriction after negotiating with Lincoln last weekend. The decision stunned the bank industry, which immediately mobilized to get it removed. But even if that provision is ultimately removed, there is bipartisan support for restricting banks from trading in derivatives with their own accounts for purely speculative purposes. Indeed, in her three-page letter, Bair said that neither banks nor bank holding companies should engage in speculative derivatives trading. But she said banks have a legitimate need of derivatives to help them hedge against interest rate fluctuations. Moreover, she said, banks “play an essential role” creating markets for commercial firms that enter into derivatives contracts to manage their risks. The value of derivatives depends on the price of some underlying asset. Corn futures and stock options are examples of some of the simpler derivative products. Bair said that even if banks created subsidiaries for their derivatives business, those entities would be outside the FDIC’s scrutiny. “We do not have the same comprehensive backup authority over the affiliates of banks as we do with the banks themselves,” she wrote. Representatives from Dodd’s and Lincoln’s offices were not immediately available to comment.

Read the full article →

Robert Kuttner: Obama Rejects Bipartisan Bank Deal

April 25, 2010

Although Senate Banking Committee Chris Dodd and his sometime Republican ally Richard Shelby continued to make noises on the Sunday talk shows about a possible bipartisan deal, both President Obama and House Financial Services Chairman Barney Frank have personally urged Dodd not to cut a deal with Republicans. I asked Frank point blank why Dodd would want such a deal, and he said–on the record–”I have no idea, but both President Obama and I have urged him not to.” This is a welcome sign that Obama realizes that public opinion is moving in the direction of tougher banking reform, and that he learned from the health debate that bipartisan compromise on key reform issues is a snare and a delusion. Kudos to Chairman Frank and to the President. Assuming that Dodd doesn’t cave, the Democrats still need 60 votes if Republicans decide to filibuster the motion to take up the bill. But with tide turning strongly against coddling Wall Street, it is hard to imagine that a few Republicans won’t break ranks. If so, there may be no filibuster at all. On one of the most contentious issues, derivatives reform, Maine Republican Senator Olympia Snowe sent a letter to Majority Leader Harry Reid on Friday urging him to back Senator Blanche Lincoln’s tough derivatives provision, which not only narrows exclusions in the draft legislation, but keeps big banks from trading derivatives for their own accounts. It’s hard to imagine Snowe backing this measure and then joining in a filibuster to block consideration of the reform altogether. Here is part of her letter: “I believe that strong derivatives regulation goes to the heart of an effective financial reform bill and that Chairman Lincoln’s legislation is a strong step towards realizing this fundamental component to financial reform……I believe that we should err on the side of caution and finally bring full transparency to these markets once and for all and allow regulators to preemptively identify these damaged firms. “Accordingly, I believe the Senate should start with a comprehensive, strong derivatives reform proposal and defend attempts to weaken it, not the other way around and the legislation produced by the Senate Agriculture Committee includes the strongest safeguards and most robust transparency provisions on our expansive derivatives market. I urge the Majority Leader to incorporate these provisions into the regulatory reform bill.” Then we have the case of the accidental senator from Massachusetts, Scott Brown, who is facing re-election in just two years. His special election last January was a fluke–a perfect storm of voter backlash against recession and a weak Democratic campaign. Brown ran as a kind of regular-guy economic populist. I can’t believe that Brown will stand up for Wall Street against Main Street and vote to filibuster against even taking up the bill (Elizabeth Warren should run for the Democratic nomination to take him on in 2012. Now that would be one helluva race.) In short, Republican leaders McConnell and Shelby are bluffing. They know they can’t hold their troops, and that’s why they so desperately want a deal with Dodd for a weaker bipartisan bill that Republicans can support. If Dodd avoids such a deal, my hunch is that several Republicans will not support the filibuster and that debate will proceed. And once it does, there will be several votes on key strengthening amendments. These will also put Republicans in a bind. Senator Chuck Grassley supported the Lincoln bill in the Agriculture Committee. Will he now join Snowe and vote to add it to the reform bill? How could Grassley vote to strengthen the derivatives position, but vote to block taking up the whole bill? My sources tell me that one key Democrat, Treasury Secretary Tim Geithner, is actually somewhat more pro-banker than moderate and heartland senate Republicans when it comes to derivatives reform. He is sympathetic to Wall Street complaints that the Lincoln bill would eat into derivatives profits, and has weighted in on the side of watering down her bill. Happily, he doesn’t vote, but President Obama should decide the administration position and not leave it to Geithner. Two other key amendments: One will be offered by Senators Sherrod Brown, Ted Kaufman, Bob Casey and Sheldon Whitehouse, limiting the size of large banks; another by Senators Jeff Merkley and Carl Levin would write into law the Volcker Rule separating commercial banking from financial gambling. These will also put Republicans in a deliciously awkward spot–though they may also be opposed by pro-Wall Street Democrats such as Evan Bayh of Indiana and Mark Warner of Virginia. And watch closely to see how Chuck Schumer votes on these strengthening amendments. Schumer, once known as the senator from Wall Street, is remaking himself as a financial reformer in preparation for a possible run for majority leader against Dick Durbin should Harry Reid go down this November. Bottom line: If the Senate Democratic Leadership can resist the snake oil of a bipartisan deal and if Obama personally works the phones and takes control of his own administration, the bill will probably get stronger as it works its way through Congress. This is the right kind of bipartisanship–a progressive bill so clearly demanded by public opinion that many Republicans don’t dare to oppose it. Even so, this bill is far from the final chapter of reform. While banks will not be able to do quite as much damage to the rest of the economy, entire areas of abuse such as credit rating agencies, hedge funds, and private equity are largely untouched and the basic business model of the financial conglomerates will be only partly constrained. Real mortgage relief is also put off for another day. A little history is reassuring. For all of his personal resolve, it took Franklin Roosevelt seven years and several pieces of landmark legislation to complete the New Deal structure of financial regulation that kept Wall Street well harnessed until the late 1970s – including the Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility Holding Act of 1935, ending with the Investment Company Act of 1940. Even in that golden age of reform, Wall Street wasn’t tamed in a day. If the Democrats don’t extinguish the momentum with a premature bipartisan deal, public understanding and indignation are still building. Regulatory agencies are beginning to do their jobs, and Democrats are starting to sound like a progressive party. It’s about time. Robert Kuttner’s new book is “A Presidency in Peril.” He is co-editor of The American Prospect and a senior fellow at Demos.

Read the full article →

Senators Send Letter To Harry Reid Urging Strong Derivatives Reform

April 25, 2010

A bipartisan coalition of Senators concerned about weak oversight of derivatives sent a letter to Senate Majority Leader Harry Reid urging him to strengthen the current financial reform bill and resist efforts to weaken it. The letter, dated Friday, details 11 principles the Senators hope the final bill will incorporate. Derivatives — financial instruments that derive their value from other financial instruments — are used to hedge against risk, like rising interest rates or fluctuations in currency prices. Largely unregulated, they’re also used to create financial securities out of thin air (a bet on a bet on a bet, for instance), and they’re used to make bets without parties needing to front the necessary cash. It’s the implosion of these that contributed to the worst financial crisis and economic downturn since the Great Depression. The Senate is expected to begin debating the main bill, authored by Banking Committee Chairman Christopher J. Dodd, this week. A complementary bill, authored by Agriculture Committee Chairman Blanche L. Lincoln, which has jurisdiction over the Commodity Futures Trading Commission, which regulates some derivatives products, is largely viewed as the stronger of the two bills. The bipartisan coalition wants the final bill to incorporate the strongest provisions from the two measures, or at the very least adopt Lincoln’s bill as the derivatives section of the final product. The bill authored by Lincoln, of Arkansas, shines more light on megabanks’ derivatives operations than the bill put forward by Dodd, of Connecticut, experts say. “If we are to effectively regulate the derivatives market, we must start the Senate floor debate with the strongest proposal we can craft and defend against the inevitable attempts to weaken it — rather than rely upon later amendments to add essential reforms,” the letter reads. “Starting the amendment process from a position of weakness is no way to start.” Among the provisions the seven Senators hope the final bill will feature are tougher rules requiring parties to trade on regulated exchanges and exchange-like facilities, mandated collateral-posting requirements so parties put cash on the table when making their bets, position limits to prevent market manipulation (which also could deter wild swings in prices for commodities that don’t reflect the underlying economic situation), and a requirement that derivatives dealers be legally compelled to act in the best interests of their pension fund, university endowment and state and local government customers. Derivatives dealers, like Goldman Sachs and JPMorgan Chase, currently are not legally required to act in the best interests of their customers. “We urge a constructive process in which the strongest provisions of each bill are combined into a proposal to reform the derivatives market that is more effective than either current proposal, and is supported by both Chairmen,” the letter states. “In the absence of such an agreement, we would find it difficult to support comprehensive reform legislation unless the best provisions of the Agriculture Committee’s bill were included as the derivatives title of the legislation.” The letter is signed by Republican Olympia J. Snowe of Maine, and Democrats Dianne Feinstein of California, Bill Nelson of Florida, Tom Harkin of Iowa, Maria Cantwell of Washington, Byron L. Dorgan of North Dakota, and Sherrod Brown of Ohio. Read the letter below: Letter to Senate Majority Leader Reid Regarding Derivatives

Read the full article →

Swaps Dealers Prepare Defense as Obama Sees `Big Battle’ for Bank Overhaul

April 22, 2010

By Shannon D. Harrington and Matthew Leising April 22 (Bloomberg) — Legislation to regulate the $605 trillion derivatives market is reaching beyond issues that threatened the financial system two years ago and may impede the market, according to industry leaders. U.S. Senate legislation that would require traders to instantly report prices and execute contracts on exchanges or facilities resembling exchanges won’t lessen risk to the financial system, said Robert Pickel , executive vice chairman of the International Swaps & Derivatives Association. Regulators including the Federal Reserve have demanded dealers curb such risks since the bankruptcy of Lehman Brothers Holdings Inc. and near-failure of Bear Stearns Cos. in 2008. “Our focus has always been on reform that dealt with the issues at hand — systemic risk and interconnectedness,” Pickel said in an interview before the start today of the group’s annual conference in San Francisco. “Exchange trading or real time price reporting doesn’t further any of those goals.” The industry and lobbying organization will defend the market this week as President Barack Obama and Congress push to complete legislation that would bring trading under government oversight for the first time in 30 years. Under Senate legislation, the most actively traded swaps would be moved through clearinghouses designed as a safety net for the financial system. “These markets have proved to be a major source of uncertainty and risk during periods of financial disruption,” Treasury Secretary Timothy Geithner told the House Financial Services Committee April 20. They are “a flaw in our financial infrastructure,” he said. End of Era The gathering in San Francisco of traders including the banks JPMorgan Chase & Co. and Morgan Stanley and money managers Pacific Investment Management Co. and D.E. Shaw Group may mark the end of an era for the industry, said Craig Pirrong , a finance professor at the University of Houston. “I have this sort of fin de siècle feeling about this whole thing,” said Pirrong, who takes part today in an ISDA panel titled “Lessons From the Financial Crisis.” “The world is going to change in very unpredictable ways.” A group of dealers including JPMorgan , Goldman Sachs Group Inc. and Morgan Stanley have dominated swaps trading, which generated an estimated $28 billion of revenue for the five biggest U.S. banks last year, according to company filings with the Fed and people familiar with their income sources. ‘Big Battle’ Foreseen ISDA , based in New York, has set industry standards and trading conventions since it formed in 1985. Derivatives are contracts used to hedge against losses from stocks, bonds, currencies, commodities, interest rates and weather. They are also used to speculate on changes in those underlying assets. Congress probably will approve the overhaul of financial regulation by June, White House economic adviser Lawrence Summers said in an interview on Bloomberg Television’s “Political Capital With Al Hunt.” Obama, at a fundraiser in Los Angeles April 20, predicted a “big battle” over the legislation. He scheduled a speech today in New York on financial reform. The Senate Agriculture Committee approved yesterday derivatives legislation that would require U.S. lenders such as JPMorgan Chase and Bank of America Corp. to spin off their swap trading desks or lose access to the Fed’s discount lending window and other government support. The bill also would require banks to instantly report prices to the public on swaps trades. Prices now are only provided publicly on some credit-default swap contracts at the end of the day through Markit Group Ltd., a London-based data firm and index administrator majority owned by the dealers. Republican Joins Democrats The Senate panel voted 13-8 to back a bill drafted by Committee Chairman Blanche Lincoln , an Arkansas Democrat. Senator Charles Grassley , an Iowa Republican, joined Democrats in approving the measure. The provision to make lenders separate swaps trading from commercial bank operations is a contentious issue as lawmakers weigh new rules for Wall Street. Deputy Treasury Secretary Neal Wolin , who is to give the keynote address at ISDA’s conference today, said last month that the administration will “fight hard against any efforts to weaken” legislation in the Senate. ISDA leaders say they have accomplished much of what proposals in Congress seek without mandates. Dealers have moved more than $7 trillion of credit-default swaps during the past year into clearinghouses that are designed to absorb losses should one of their members fail. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. ‘Unfettered Access’ Last year, dealers finished recording the vast majority of credit derivatives contracts in a central repository managed by the Depository Trust & Clearing Corp. New York-based DTCC said last month that it will seek to give regulators “unfettered access” to information. Where banks are pushing back is on how the trades are done — on regulated exchanges or similar electronic trading systems — and how much information is given to the public and not just regulators. A Senate bill introduced by Banking Committee Chairman Christopher Dodd and approved by the panel last month would require the most-active swaps to be traded on systems that show prices beforehand and can sell or transfer open positions if a party to the transaction defaults. The bill would in effect create exchange trading for standardized swaps, said Kevin McPartland , a senior analyst at research firm Tabb Group in New York. Threat to Liquidity “If prices and sizes of derivative trades are made instantly available to the markets, people are going to trade against the dealers holding positions,” Conrad Voldstad , ISDA’s chief executive officer, said in an interview April 20. That may hamper liquidity in the market or make it more expensive for companies and money managers to trade, Pickel said. “You’ll pull back, and that will reduce liquidity,” he said. “Or because of that risk, you might charge more.” Legislation in the Senate proposed last week by Lincoln would limit trading by commercial banks by barring dealers in swaps from taking advantage of emergency liquidity functions and the Federal Deposit Insurance Corp.’s insurance and guarantee functions, as well as the Fed’s discount window. “Lincoln’s bill has made the situation much more contentious than it already was,” McPartland said in a telephone interview. To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net ; Matthew Leising in New York at mleising@bloomberg.net .

Read the full article →

Derivatives Bill Clears Senate Panel That Would Force Swaps Desk Overhaul

April 21, 2010

By Phil Mattingly April 21 (Bloomberg) — The Senate Agriculture Committee approved derivatives legislation that would require U.S. lenders such as JPMorgan Chase & Co. and Bank of America Corp. to spin off their swaps trading desks. The panel voted 13-8 to back a bill drafted by Committee Chairman Blanche Lincoln, an Arkansas Democrat. Senator Charles Grassley , an Iowa Republican, joined Democrats in approving the measure. The provision to make lenders separate swaps trading from commercial bank operations has been among the most contentious issues as lawmakers weigh new rules for Wall Street. Grassley’s vote provided a rare bipartisan sign in the Senate debate over financial-industry regulations. Grassley said his vote today doesn’t mean he supports the broader legislation sponsored by Senate Banking Committee Chairman Christopher Dodd . Dodd, a Connecticut Democrat, is negotiating a bipartisan deal on the larger bill with Alabama Senator Richard Shelby , the banking panel’s top Republican. Lincoln’s derivatives measure would be merged into the broader bill, she told reporters today. “The derivatives piece is significant, but that larger bill has a number of flaws that need to be resolved before I’d support it,” Grassley said in a statement after the vote. Lawmakers are weighing derivatives oversight after bets made by American International Group Inc. brought the New York- based insurer to the brink of failure in 2008, forcing the U.S. government to pledge more than $182 billion in assistance. Lincoln’s bill would bar companies that deal in swaps, a form of derivative, from bank privileges such as accessing the Federal Reserve’s discount lending window, emergency liquidity functions and the Federal Deposit Insurance Corp.’s deposit guarantee. ‘Small Fixes’ “This is no time for small fixes or tweaking around the edges,” she said in a statement before the vote. “This is the time for bold change and big decisions about the future of our country and the global financial system.” Lawmakers from both parties have expressed concern about the spinoff proposal and Commodity Futures Trading Commission Chairman Gary Gensler has refused to support it, saying “the Federal Reserve and the Treasury has to think through these issues.” “The Senate Agriculture Committee voted out a bipartisan bill that will bring derivatives trading out of the dark, provide strong oversight of market participants, and combat fraud, abuse and manipulation,” Treasury Secretary Timothy F. Geithner said in a statement. The spinoff provision of Lincoln’s bill would cut banks’ ability to lend and could drive derivatives markets overseas, said Kenneth E. Bentsen of the Securities Industry and Financial Markets Association, a Washington trade group. Antithetical “At a time when borrowers are already finding it difficult to obtain credit, limiting financial institutions’ ability to lend seems antithetical to the goals of comprehensive reform legislation,” Bentsen, Sifma’s executive vice president for public policy and advocacy, wrote in an April 20 letter to Lincoln and Senator Saxby Chambliss of Georgia, the Agriculture Committee’s ranking Republican. The bill would require mandatory clearing and exchange trading for standardized derivatives. Parties in over-the- counter trades would be required to put up increased capital. Chambliss said Lincoln’s bill would put undue burden on institutions such as AgriBank FCB and CoBank ACB. “All the sudden they are going to be treated like Goldman Sachs or JPMorgan,” Chambliss said. Gensler, who has advocated requiring all derivative trades be cleared and traded on exchanges, said any additional exemptions would only open doors to more. “Fundamentally the choice we’re dealing with is, every exemption from clearing makes it a little more likely that a taxpayer will have to stand behind a bailout,” Gensler said. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net .

Read the full article →

Video: Senator Lincoln Seeks Transparency in Derivatives Market: Video

April 16, 2010

April 16 (Bloomberg) — Blanche Lincoln, an Arkansas Democrat, talks with Bloomberg’s Lizzie O’Leary about her proposal to limit derivatives trading by commercial banks. Lincoln, who chairs the Agriculture Committee, says her committee will will begin considering her proposal next week. (Source: Bloomberg)

Read the full article →

Lincoln Bucking White House Pressure, Pushing Forward To Weaken Derivatives Reform

April 13, 2010

Sen. Blanche Lincoln (D-Ark.) said on Tuesday that her bipartisan Wall Street reform negotiations will continue, despite strong signals from the White House that exemptions in the bill for end users of derivatives are not up for discussion. End users are farmers, airlines, dairy producers or other companies that use derivatives as an integral part of their business, rather than as tools to manipulate the market or profit from speculation. The administration wants derivatives contracts to be traded on exchanges or centrally cleared. Banks are seeking exemptions for end users, however, as a loophole to keep the derivatives market in the dark, as it is currently. Brokers and swaps dealers have been pressuring end users to lobby Congress for an exemption. “The idea that all end-users of derivatives somehow be absolved from having to clear their trades is something that we do not agree with,” Treasury Department Deputy Secretary Neal Wolin said during a briefing with reporters last week, “and we will fight hard to oppose.” On Tuesday, Treasury Secretary Tim Geithner joined in, calling for all derivatives to be cleared transparently on an exchange. Bank lobbyists have been fighting hard against derivatives reform amid speculation that Wall Street will offer the proposed Consumer Financial Protection Agency to Democrats as a concession for loose rules on derivatives. Wall Street has been targeting the Agriculture Committee. “I always get lobbied by anybody who has an interest in whatever the issue may be. And there’s been no shortage of folks expressing their opinion about this issue,” said Sen. Saxby Chambliss (R-Ga.), the committee’s ranking Republican. Lincoln has been unmoved by the White House pressure. On Tuesday afternoon, she plans to brief her Democratic colleagues on side negotiations she’s been having, Chambliss told reporters. Chambliss has yet to brief his own party on the talks but plans to soon, he said. (Lincoln’s negotiating partner won his seat in 2002 after putting out this infamous ad .) “We’ve been continuing to work with Senator Chambliss and working to find that common ground and figure out where we can be,” Lincoln told reporters on her way into a meeting with the Democratic caucus. Lincoln’s beef with the White House comes as the administration backs her in a contested primary against progressive challenger Bill Halter, who has the backing of organized labor. The Agriculture Committee has some jurisdiction over derivatives because they began as simple financial products for farmers — corn or pork belly futures, for instance — but have evolved into a roughly $600 trillion market that runs largely unregulated. The Banking Committee, chaired by Sen. Chris Dodd (D-Conn.), had taken the lead, however, on writing derivatives legislation, though Lincoln’s entry into the debate complicates matters. “We’ll dovetail [the two bills] when it comes to the floor,” said Lincoln, saying she wanted to move legislation through her committee “soon.” Dodd subtly dismissed Lincoln’s entry into the debate by roping her in with all other members of the Senate who are not on the Banking Committee. “A lot of members have various ideas on all of this, who are not members of the committee, as well as those on the committee, and that’s obviously a dynamic process,” he said in response to a HuffPost question about Lincoln’s derivatives negotiations. Chambliss, meanwhile, said that the White House pushback on his negotiations with Lincoln indicate that that the administration is not serious about crafting a bipartisan deal and would rather score political points. “It’s almost too obvious that the White House may not want a bipartisan agreement,” he told reporters on Tuesday. “That’s a step forward,” suggested Sen. Bernie Sanders (I-Vt.).

Read the full article →

China Faces `Test’ Meeting Grain-Output Goal on Drought, Cold, Wen Warns

March 26, 2010

By Bloomberg News March 26 (Bloomberg) — China, the biggest grain user, faces a test meeting a crop-output target because of drought in the southwest and a cold winter in the north, Premier Wen Jiabao said, underscoring the challenges brought on by bad weather. Meeting this year’s goal of growing 500 million metric tons of grains will be a “test for sure,” the Xinhua News Agency reported, citing Wen. Wheat output in China may fall because of the cold weather, Wen was cited by the state agency as saying during a trip to drought-hit Yunnan from March 19-21. China’s leaders have prioritized food security to ensure that the world’s most populous nation has adequate supplies and stockpiles. Rivers in China’s southwest have plunged to record low levels, according to the Ministry of Water Resources. About 18 million people are short of drinking water, Xinhua reported. “There is little prospect for meaningful rainfall until May” in the southwest, forecaster Accuweather Inc. said in an e-mail. “The drought is badly affecting the planting of crops” and a serious shortage of water in reservoirs will make it even harder for planting to be sustained, it said. China set the 500 million ton target in February and the goal is lower than last year’s harvest of 530.8 million tons, Xinhua said in the report late yesterday. Output had increased in the six years to 2009, the report said. ‘Having an Impact’ “The cold weather and drought are definitely having an impact on China’s wheat crop,” Jay O’Neil, an adviser to the U.S. Grains Council, said by phone from Shandong today. Still, it’s too soon to tell what the outcome may be because wheat is a “hardy” crop that can recover if conditions improve, he said. The drought in the China’s southwest, which may have been caused by the El Nino weather phenomenon, extends southward into Southeast Asia. The Mekong River, which flows from China through five countries including Cambodia is at its lowest level in 30 years, Thailand’s Department of Water Resources said on March 10. Rice production may drop and the price may jump because of the dry weather, Thai Prime Minister Abhisit Vejjajiva said March 2. Palm oil output in Malaysia, the world’s second-largest grower, may decline 2 percent to 3 percent this year on the El Nino, the Malaysian Estate Owners Association said March 19. China maintains grain stockpiles of 150 million to 200 million tons, equivalent to about 40 percent of the nation’s annual demand, China Grain Reserves Corp. President Bao Kexin said March 6. Wen judges that the country’s grains market would be “too tight” with less than 150 million tons, according to Bao. Sinograin, as the company is also known, is a state-run entity that stockpiles grain for the government. Wheat Stockpiles O’Neil, the adviser to the U.S. Grains Council, said that the grain market generally believes that China has a “very good” quantity of wheat stockpiles, which may be used to offset any possible reduction in this year’s crop. China’s wheat imports are limited to small number of shipments of good-quality wheat at present, he said. Food self-sufficiency remains a priority for China because relying on other producers isn’t sustainable, Vice Minister for Agriculture Niu Dun told a conference in January. China has to produce 500 million tons of grain a year to feed its population, according to Niu. That allows for per-capita grain consumption of 400 kilograms (882 pounds), which is “not high,” he said. El Ninos, which can parch parts of Asia, are caused by a warming of the equatorial Pacific Ocean. The current El Nino is weakening after peaking in December, Philippine Senior Weather Bureau Specialist Daisy Ortega said on March 24. China’s government will by July ship 300,000 tons of wheat, 540,000 tons of rough rice and 580,000 tons of corn to southwestern provinces including Yunnan as part of a stockpile- rotation plan, the State Administration of Grain said in a statement yesterday. Losses from the dry weather total 23.7 billion yuan ($3.5 billion), Xinhua reported. About 79 million mu (5.3 million hectares) of crops are under stress in the southwest, about half of them in Yunnan province, the water ministry said in a March 10 statement. The drought, which is also affecting parts of Guangxi and Guizhou provinces, has lasted almost five months, the ministry said. To contact the reporter on this story: William Bi in Beijing at wbi@bloomberg.net

Read the full article →

Dave Murphy: DOJ’s Holder Calls for Historic Era of Antitrust Enforcement in Agriculture

March 16, 2010

Once again rural America stands on the Edge of Hope Ankeny, IA – There are moments in a nation’s history that define it. For America’s remaining 2 million farmers (less than 1% of the population) and the more than 300 million eaters, the recent joint Department of Justice and Department of Agriculture workshop on lack of competition in the food and agricultural sectors held in Ankeny, Iowa is potentially one of those moments. With concentration at record levels in agriculture today, well past levels that encourage or even allow fair prices or competition, the Obama administration’s call for public workshops is an historic event. While agribusiness continues to deny any problem, a simple look at the facts shows that the playing field for family farmers and American consumers is distorted beyond anything resembling a free or competitive market. Even though these statistics have been widely published lately, I will included them here again just to illustrate the point: 1 company (Monsanto) controls the genetics of 93% of soybeans and 80% of the corn grown in the U.S ; 4 companies (Tyson, Cargill, Swift & National Beef Packing Co.) control 85% of the beef packing industry; 4 companies (Smithfield, Tyson, Swift & Cargill) control 66% of the pork packing industry. For farmers trying to get a fair price for seeds or livestock, such concentration places a crushing burden on their bottom line. This past Friday nearly 800 individuals from across the country gathered in a small community college auditorium to hear top officials in the Obama administration, including cabinet members Secretary of Agriculture Tom Vilsack (former governor of Iowa) and Attorney General Eric Holder, address the issue of how such excessive market concentration and food monopolies have negatively impacted the lives and livelihoods of family farmers, consumers and rural America. Over the course of eight hours, the audience, made up mostly of farmers, labor workers and farm advocates, some of whom traveled from as far as Montana, Texas, Arkansas and North Carolina, listened as academics, economists, agribusiness giants, commodity groups and a few farmers detailed specific areas of concern regarding the lack of competition in agricultural markets or, in the case of a several industry representatives, denied outright the existence of any problem. The gravity of this meeting and its outcome could be felt by all attendees as Vilsack, Holder, DOJ antitrust chief Christine Varney, Iowa Senator Chuck Grassley and others took the stage for the first panel. A sense of anticipation and restlessness filled the crowd as the panel was announced, which included Iowa’s attorney general, Tom Miller, Congressman Leonard Boswell, Lt. Governor Patty Judge and Secretary of Agriculture Bill Northey. The inclusion of the last three panelists, while expected, caused some dismay by longtime Iowa farm activists. Having two Democrats (Boswell and Judge) and a Republican (Northey) at the podium with a long history of supporting industrial agriculture was not what many had hoped for when the workshops were first announced. Workshop #1 Begins: Vilsack, Holder and Varney After a round of pleasantries, saying he was glad to be back in Iowa, Secretary Vilsack opened the hearing sharing his concern about the loss of family farmers over his lifetime and the shrinking of rural communities, which he has seen as a small town lawyer, mayor, state senator, governor in Iowa and now as Secretary of Agriculture. “Looking at the statistics regarding rural America and farms, I have a lot of concern,” said Secretary Vilsack. He then went on to detail how the rising age of the average farmer, now 57 as reported in the 2007 Ag census, the higher and more prolonged rates of unemployment in rural America and the loss of economic opportunity in rural areas across the country were all issues that he planned to address by improving programs at the USDA. No matter what one believes about Vilsack’s agricultural biases, favoring biotech, ethanol and exports while still increasing opportunities for beginning farmers, organics and nutrition programs like farm to school, it was evident that he realizes that agriculture and rural America are at a serious crossroads under his watch. “This is not just about farmers and ranchers,” Vilsack said. “It’s really about the survival of rural America.” In a USDA press release issued later that day, Vilsack drove that point home even further. “In my travels across the country, I hear a consistent theme: producers are worried whether there is a future for them or their children in agriculture, and a viable market is an important factor in what that future looks like,” said Vilsack. “These issues are difficult and complex, which is why this workshop today is so important and long overdue.” Attorney General Holder called the public workshop “a milestone” event. Many in the audience, especially family farmers concerned that the workshop would be another dog and pony show that promises change, but only returns agribusiness as usual, were encouraged by Holder’s attendance, which was only announced late last week. For leading industrial ag companies, Holder’s appearance in Ankeny, was a sign of how serious the Obama administration is intent on taking the issue. During his opening statement, Holder said that the DOJ was committed to vigorous protection of competition , noting how ” reckless deregulation has restricted competition in agriculture.” Holder went on to say, “We all know that one of the greatest threats to our economy is the erosion of free competition in our markets. And we’ve learned the hard way that recessions and long periods of reckless deregulation can foster practices that are anti-competitive and even illegal.” These were stern warnings for agribusiness’s minions in the audience. Closing out the first panel was DOJ antitrust chief, Christine Varney, who was widely recognized as the driving force behind the antitrust hearings. Speaking about the realities of U.S. antitrust law and real enforcement expectations, Varney promised a tough stance from her office and a clear signal that a new sheriff is in town. “Big companies aren’t necessarily bad,” Varney said. “But they have a responsibility to act responsibly. Patents have in the past been used to maintain or extend monopolies — and that’s illegal.” For those family farmers and proponents of sustainable agriculture who have long seen Monsanto as the 800-pound agribusiness bully in the room, Varney’s comments were applauded. Farmers Unite: Call on Obama to “Bust up Big Ag” Even so, while issues of lack of competition and enforcement of antitrust laws have been on the agenda for family farmers and rural advocates for decades, the rest of the day’s lineup did not live up to what many had hoped for. When originally announced, the first workshop had been proposed to focus on seed concentration, only to get watered down to include hogs, livestock, transparency and buyer power. For weeks leading up to the workshop, farm groups and rural advocates had been quietly pushing the USDA to find more inclusive voices and more progressive farmers, those who had been most negatively impacted by excessive ag concentration, to be included on the panels. The resistance that DOJ and USDA officials met from family farm groups led to a delay by several days of the official farmer panel lineup being released publicly and led Sectary Vilsack to allow more farmer comment during the lunch break. As a result of the delay, leading farm, labor and consumer groups held a townhall meeting the evening before to make sure that real farmer voices were heard on these important issues. On the eve of what may have been the most historic day in agriculture in the 21st century, more than 250 farmers, their friends and families, union workers and farm advocates gathered in a hotel in Ankeny, just down the road from the official DOJ/USDA event to bring attention to their plight and call for the administration to “Bust up Big Ag.” During the open forum period, when more than 40 individuals from the audience had one minute to address the crowd, the sense of urgency for farmers and rural Americans was palpable. Jerry Harvey, a 4th generation southern Iowa dairy farmer described the recent plight of America’s dairy farmers, who have experienced a record crisis this past year as prices have dropped more than 50% at times from 2008 levels, stranding farmers with thousands of dollars of debt to carry each month for more than a year. “What turned out to be the American dream, turned out to be the American nightmare for the past 15 months,” Harvey said, detailing his interactions with Iowa’s political leaders, including Senator Harkin and Grassley and Congressman Boswell’s offices to find some solution to the current dairy crisis. After Harvey, fellow Iowa dairyman, Scott Cruise addressed the crowd, telling them that he was afraid that he wouldn’t be able to pass on his farm to his 15 year old son, who desperately wanted to become the 5th generation to farm and milk cows in Iowa. Unfortunately for the audience, the story was all too familiar. For many dairy farmers, like the chicken farmers and hog farmers before them, who have all been forced out of production because of the false efficiencies of excessive concentration, the Obama administration’s announcement of an antirust lawsuit against Dean Foods, which controls more than 40% of the fluid milk market in the U.S., it may be too late. Even as farmers in the audience the next day clapped when Varney mentioned the DOJ’s antitrust lawsuit against Dean Foods , many realized the debt levels these family dairy farmers have been forced to endure the past year has reached a crisis point. While many have waited a lifetime to hear government officials address the lack of competition in agriculture and enforce antitrust laws, the only question that remains is: How fast will the wheels of justice turn?

Read the full article →

← Previous Entries