Associated Press writer Chris Williams reported yesterday that, “The economic downturn in the Upper Midwest will continue through 2009, with the unemployment rate predicted to hit 14 percent in part of Michigan by the end of the year, according to the latest forecast from the Federal Reserve Bank of Minneapolis.
“Employment by year-end is expected to be down from last year’s levels and unemployment rates are expected to rise above historic averages throughout the area. The forecast doesn’t consider the stimulus package now being debated in Washington.”
With respect to the stimulus package, David M. Herszenhorn and Carl Hulse reported in today’s New York Times that, “House and Senate leaders on Wednesday struck a deal on a $789 billion economic stimulus bill after little more than 24 hours of rapid-fire negotiations with the Obama administration, clearing the way for final Congressional action later this week.
“The package of spending increases and tax relief, intended to spur an economic recovery and create jobs by putting money back in the pockets of consumers and companies, ended up smaller than either the House or Senate had proposed.”
The Times noted that, “The House was poised for a final vote as early as Friday, with the Senate to follow, clearing the way for President Obama to sign the bill by Monday. The White House is considering a prime-time bill signing ceremony, and on Wednesday asked the television networks if they would air the event.”
In an analysis of the potential economic impacts of the stimulus, the Congressional Budget Office noted yesterday that, “The macroeconomic impacts of any economic stimulus program are very uncertain. Economic theories differ in their predictions about the effectiveness of stimulus. Furthermore, large fiscal stimulus is rarely attempted, so it is difficult to distinguish among alternative estimates of how large the macroeconomic effects would be. For those reasons, some economists remain skeptical that there would be any significant effects, while others expect very large ones.”
Cecilia Kang reported in today’s Washington Post that, “Congress has targeted more than $6 billion to wire rural America with Internet service as part of the nearly $790 billion stimulus plan. But the bill would place much of those funds in an Agriculture Department program that has been criticized for its past management of grants, raising concerns among some public interest groups.
“Under a deal House and Senate leaders negotiated yesterday, about $1.5 billion would fall under the oversight of the USDA’s Rural Utilities Service, a program launched in 2002 to connect farming towns to high-speed, or broadband Internet, according to a Senate Commerce Committee aide.”
Today’s Post article added that, “Some public advocacy groups are critical, citing a September 2005 report on an investigation by the USDA’s inspector general that found that $236 million, or more than one-quarter, of the program’s loans under review ‘was either not used as intended, not used at all, or did not provide the expected return of service.’
“The Secretary of Agriculture and some congressional supporters say the program has been changed to address the problems.”
More specifically with respect to agricultural production and the economy, Karen Mracek reported yesterday at The Des Moines Register Online that, “Charles Evans, president of the Federal Reserve Bank of Chicago, said Iowa’s agriculture economy helped the state avoid the worst of the recession – until now.”
The Register item, which was presented in a Q and A format, noted that, “Until the fourth quarter of last year, Iowa was weathering the recession better than most states in the Seventh Federal Reserve District, and better than the nation.
“In no small part, the strengths behind Iowa’s income and employment arose from strong farm commodity prices, which were tied to several developments: Strong global demand by developing countries for food products; Rising ethanol demand, which boosted corn prices and ethanol plant investments; Low global stocks of some grains, which arose from disappointing harvests around the world.”
More recently on the issue of agricultural commodity prices, the USDA’s Economic Research Service (ERS) noted yesterday in its Oil Crops Outlook report that, “[Soybean] cash prices in many parts of the country are approaching $10 per bushel again. A stronger price outlook raises the forecast of the 2008/09 U.S. average farm price by 25 cents to $8.75-$9.75 per bushel.”
The USDA’s Foreign Agricultural Service (FAS) indicated on Tuesday (“Oilseeds: World Markets and Trade- Drought in South America to Limit Soybean Exports”) that, “Declining South American crop prospects have played a role in boosting soybean prices from late 2008 levels yet they remain well below last year’s peak. Aside from exchange rate and energy price impacts, a greater supply of alternative feed ingredients, particularly rape and sun seed and feed grains, and slowing economic activity have removed some of the pressure on soybean demand and kept price rises in check.”
Also on Tuesday, a separate FAS report (“Grain: World Markets and Trade- Shrinking Corn Supplies in Argentina Further Slow World Exports”) noted that, “At the same time as Argentina’s exportable supplies of corn have shrunk due to drought, world import demand is down sharply as a result of economic turmoil, and feed demand has shifted to other competitively priced substitutes including feed-quality wheat, cassava, and
Distillers Dried Grains (DDGS).
“Argentina’s government has yet to open export registrations. However, once those registrations are opened, we would expect the tight new-crop supplies to be sold only to traditional and nearby markets. We would also expect Argentina’s North African and Mediterranean markets to be aggressively sought-after by Brazil, Ukraine, and the EU.
“The United States may be poised to meet some of Argentina’s shortfall, as evidenced by recent strong corn export sales.”
In a related article, Bloomberg writer Matthew Craze reported yesterday that, “The outlook for Argentina’s soybean crop may improve as summer rains replenish soil moisture, said Alberto Rodriguez, head of the nation’s Vegetable Oil and Cereals Export Center.
“Downpours will increase in the second half of February and into March, bringing much-needed rains to the Argentine Pampas, where about 20 percent of the world’s soybeans are grown, the Buenos Aires Cereals Exchange said today.”
The article added that, “Corn will benefit less from the rain than soybeans because the crop is more developed, Rodriguez said. Both crops are harvested in Argentina between March and June.”
Charles Abbott noted yesterday at the Reuters Commodity Corn Blog that, “U.S. farmers could set a record for soybean plantings this year, topping 2008’s 75.7 million acres. The Agriculture Department will release its initial projection of seedings later this week. Some economists see plantings of 79 million acres (32.9 million ha) given that market prices and production costs currently favor soybeans.
“Most expect corn plantings to lose ground as global recession takes the shine off demand from livestock and ethanol. But it would be daunting to break the U.S. corn plantings record even if the biofuels boom were re-ignited.”
Meanwhile, in its Rice Outlook report from yesterday, ERS noted that, “The 2008/09 U.S. all-rice season-average farm price (SAFP) was lowered 50 cents per hundredweight (cwt) on both the high and low ends to $16.00-$17.00 per cwt, still the highest on record. The downward revision was based on reported cash prices through mid-January and expectations regarding prices the remainder of the market year.”
And Bloomberg writer Jeff Wilson reported yesterday that, “Corn and soybeans fell the most in more than a week on skepticism that the financial-rescue and economic-stimulus plans in the U.S. will end the recession, dimming prospects for food, animal feed and biofuel demand.”
In news regarding the livestock sector, a news release issued yesterday by the American Farm Bureau Federation (AFBF) stated that, “America’s dairy farmers are facing incredibly difficult circumstances due to the global economic recession driving down demand here and overseas. Dairy supplies are growing which is pulling down farm gate prices, according to Allison Specht, a dairy and regulatory economist with the American Farm Bureau Federation.”
Yesterday’s release pointed to this related AFBF report entitled, “Special Dairy Market Update.”
And in the poultry sector, Lauren Etter reported in today’s Wall Street Journal that, “A chicken housing crisis has cropped up in the U.S., and it’s producing some of the same bleak results as the human one — foreclosures, lawsuits and devastated homeowners.
“In the wake of last year’s bankruptcy filing by poultry giant Pilgrim’s Pride Corp., hundreds of farmers suddenly find themselves unable to make mortgage payments on their pricey chicken coops.
“To cut costs, Pilgrim’s, the nation’s second-largest chicken company, has terminated contracts with at least 300 farms in Arkansas, Florida and North Carolina. Under these contracts, farmers receive a set price per pound for raising chicks supplied by Pilgrim’s until they are ready for slaughter. The company turns the birds into nuggets, wings and other food.”
The Journal article noted that, “For the farmers who have been cut loose, no contract means no chicks, which means no revenue — and no money to pay off the coop mortgages. Chicken houses without chickens or contracts have virtually no resale value.”
In the biofuels sector, Clifford Krauss reported in today’s New York Times that, “Barely a year after Congress enacted an energy law meant to foster a huge national enterprise capable of converting plants and agricultural wastes into automotive fuel, the goals lawmakers set for the ethanol industry are in serious jeopardy.
“As recently as last summer, plants that make ethanol from corn were sprouting across the Midwest. But now, with motorists driving less in the economic downturn, the industry is burdened with excess capacity, and plants are shutting down virtually every week.
“In the meantime, plans are lagging for a new generation of factories that were supposed to produce ethanol from substances like wood chips and crop waste, overcoming the drawbacks of corn ethanol. That nascent branch of the industry concedes it has virtually no chance of meeting Congressional production mandates that kick in next year.”
Dan Looker reported yesterday at AgricutlureOnline that, “The Obama administration supports biofuels and wants to encourage the development of cellulosic ethanol as part of an expansion of alternative energy. But in the current economic climate, ‘it’s extremely important to maintain the structure we have,’ [Secretary of Agriculture Tom] Vilsack says.
“He has the USDA looking at options to help the industry, what he calls ‘an effort on the part of USDA to recognize the stress the industry is under.’”
Mr. Looker added that, “Vilsack won’t elaborate on what programs USDA would use, but his goal is to ‘have facilities that are on the edge continue to operate long enough to get back into a profitable situation.’”
Meanwhile, a news release issued yesterday by the Environmental Working Group and other organizations stated that, “Biofuel proponents claim that the next generation of ‘advanced biofuels’ will eliminate the problems associated with conventional biofuels and create an economically feasible and environmentally sound solution to reducing dependence on fossil fuels for transportation. Realizing these aspirations will require solving intractable technical and infrastructure challenges, as these ‘advanced biofuels’ can cause the same adverse environmental impacts as conventional ones while also presenting new dangers, such as those associated with synthetic biology. Mandating the use and production of these fuels without fully understanding their effect on the environment and food systems — as current US biofuel policy does — is irresponsible and dangerous.”
An update posted recently at the House Agriculture Committee webpage stated that, “On February 11, House Agriculture Committee Chairman Collin C. Peterson of Minnesota introduced H.R. 977, Derivatives Markets Transparency and Accountability Act of 2009. Bill language and an outline have been posted on the website. A business meeting to consider this bill has been scheduled for February 12.”
Bill Swindell and Jerry Hagstrom reported today at CongressDaily that, “House Agriculture Chairman Collin Peterson has sparked a major jurisdictional battle and triggered the ire of the financial-services community with his bill to be marked up today that would give the Commodity Futures Trading Commission primary authority to regulate over-the-counter contracts.
“House Financial Services Chairman Barney Frank said Wednesday he would seek a referral of the bill to his panel and called Peterson’s measure to regulate the derivatives market a mistake. Frank said Congress should first work on legislation that would likely give the Federal Reserve the power to be a regulator for systemic risk throughout the entire financial-services spectrum — a view shared by much of that industry.”
The article added that, “But Peterson, whose panel has jurisdiction over the CFTC, is no fan of the Fed and called it an unelected body ‘with too much power.’ His bill would mandate that all over-the-counter trades must be cleared by a CFTC-approved organization. The CFTC also would be able to suspend trading in credit default swaps, which are insurance contracts against bond defaults that have been blamed for contributing to the downfall of U.S. capital markets.”
Gardiner Harris reported in today’s New York Times that, “The peanut processing company at the center of a salmonella outbreak did not await the results of contamination tests before shipping products to customers, Congressional investigators disclosed Wednesday.
“When the plant’s manager was told that one such test had shown that the products were tainted with salmonella bacteria, he responded by saying, ‘Uh-oh,’ according to documents released by the House Energy and Commerce investigations subcommittee.”
Complete documentation and related links from yesterday’s hearing can be viewed by clicking here.
Lyndsey Layton reported in today’s Washington Post that, “As salmonella illness began spreading across the country last fall, the owner of a Georgia peanut plant that was causing the outbreak railed against the cost and delays that the contamination was causing his businesses, according to internal company documents obtained by Congress.
“Stewart Parnell, president of Peanut Corporation of America, also pressed federal regulators to allow him to continue using peanuts from the tainted plant and shipped contaminated products to customers with a homemade certificate that falsely attested to their purity, according to e-mails and memos made public yesterday at a hearing of the House Energy and Commerce Committee.”
Bloomberg writers Catherine Larkin and Lorraine Woellert reported yesterday that, “Parnell and plant manager Sammy Lightsey cited their right against self-incrimination and refused to answer lawmakers’ questions. The company is under criminal investigation after at least 600 people were sickened and nine died from salmonella traced to peanuts, peanut butter and peanut paste made at its Georgia plant. About 1,800 products using ingredients from Peanut Corp.’s plant have been recalled in the past month because of potential contamination.”
On Tuesday, National Public Radio’s (NPR) Kathy Lohr filed a report entitled, “Fallout From Peanut Contamination Hurts Farmers.”
In part, the NPR story noted that, “Peanut farmers have reacted powerfully to the salmonella contamination. Farmers in Georgia, the nation’s largest peanut-producing state, released a statement expressing disdain for the Peanut Corporation of America.
“‘It’s not an issue that’s a farmer issue, but it sure has had a severe impact on our farmers,’ says Don Koehler, executive director of the Georgia Peanut Commission.
“The fallout is hurting the roughly 5,000 peanut farmers in the state, who say they had nothing to do with the contamination. About 1,800 products have been recalled, scaring consumers away from buying peanut products. That means shellers, who buy the nuts, are not making contracts with farmers.”
The NPR item added that, “[Georgia farmer Mike] Newberry says it couldn’t have happened at a worse time. Farmers produced the largest peanut crop in U.S. history last year, so warehouses still have a large supply of nuts. The economy is suffering, and now demand for peanut butter and all peanut products is down 25 percent to 30 percent.”