World Grain - April 2007 - 6

from the editor-in-chief

Exports nearly forgotten
in lobbying by farmers

f the many impacts from exploding demand for corn as feedstock in ethanol
production, one that has not received
sufficient attention is how farmers appear to
be abandoning their long-term backing for
exports to focus on maintaining and building
the fuel market. While not wanting to rank in
importance the debate raging on matters like
fuel versus food, the potential loss of support
from producers for trade liberalization is
hugely important. If this does turn out to be
one consequence of policies aimed at establishing energy independence by increasing
production of ethanol made from domestic
crops, the repercussions will be powerful.
After all, American agriculture has been a
key backer of trade liberalization. If it turns
away from these policies, the global implications are worrying.
The issue is framed by two developments.
One that is also playing out in the E.U. and in
many others parts of the world is the attitude
of farmers toward completing Doha Round
negotiations under the World Trade Organization. Central to Doha is lowering barriers to trade, a focus that in the past made
farmers ardent advocates of reducing trade
hindrances. Tariffs that are meant to limit
imports of foreign-produced ethanol, particularly fuel made from sugar cane in Brazil,
would obviously be challenged in such trade
negotiations. Even when President Bush
went to Brazil to establish a partnership

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with that country to expand ethanol-making
technology, he refrained from even hinting
at reducing or eliminating this tariff. In contrast with their past role as front-line fighters
for American concessions to facilitate trade
agreements, farmers and farm organizations
have recently favored positions that show
little or none of the previous enthusiasm for
opening trade.
This year also is seeing major attention to
decisions on the structure and cost of farm
programs. In the past, this debate would have
centered not just on support levels, including the subsidy-like tax exemption granted
ethanol producers, but also on steps that
would help build export markets. The latter
apparently have been shunted aside in favor
of making sure the ethanol tax concession
remains. The result is that several leading
farmer organizations have neglected building
export markets. While the ethanol tariff and
tax subsidy are not tied directly to crop production, they are negatives for trade growth.
Preserving and expanding the role corn has
gained in producing ethanol have the upper
hand in influencing these policy decisions.
Further, it does not require a great stretch
of the imagination to see how wheat is also
caught in this policy shift. If grower organizations are going to press the administration
and the Congress to do everything possible to
preserve and build demand for corn in making ethanol, with little or no regard for steps to

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do the same for exporting, it becomes difficult
to imagine how the importance of exporting
for wheat will receive the lobbying attention
given to these matters in the past. It seems inconceivable that promotion of wheat exporting could be forced to take a backseat as a
result of these changes. After all, U.S. exports
of wheat still are nearly equal to domestic
demand, with both accounting for around 30
million tonnes. Yet, if producers are willing to
put corn exporting on the backburner in favor
of expanding the ethanol factor, that means a
willingness to play with 56 million tonnes of
foreign trade, accounting for about 20% of total disappearance.
Anyone at all familiar with the long-running efforts to develop export markets for
wheat and corn will find it unbelievable that
these steps could be relegated to lesser importance or even abandoned in the wake of
the ethanol surge. Yet, if the farmer organizations persist in no longer pushing policies
aimed at liberalizing trade, the pendulum
of what accounts for world trade will have
swung in a fashion unimaginable just a very
few years ago. What this all may mean to the
position of not just the U.S. but many other
countries similarly affected by these developments requires urgent study. At this stage,
the possibilities seem nearly beyond belief.
Morton I. Sosland
Editor-in-Chief

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World Grain - April 2007

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