Agricultural Economy- Trade Issues
Purdue University Agricultural Economist Chris Hurt noted yesterday at the farmdoc daily blog (“Where Have All the Beef Cows Gone?”) that, “Cattle numbers are down again, to their lowest level since 1952, according to USDA’s recent inventory count. Beef cow numbers are at their lowest level since 1962 as the devastating impacts of the 2012 drought continues the longer-term decline. Beef cow numbers were down three percent in 2012 and 11 percent since 2007. The drivers have been high feed and forage prices, persistent drought in the Southern Plains, and of course the widespread Midwestern drought of 2012.”
Dr. Hurt added that, “What will it take to turn the herd decline around? The answeris more rain, more crop production, and more pasture and forage production. Larger crop and forage production would increase availability and lower prices of these critical feedstuffs. Given the small size of the calf crop, this would bolster calf prices. A second condition beef producers would like to see before expanding is some assurance that feed prices will have an overall moderation in coming years, not just a one year decrease.”
After additional analysis, yesterday’s farmdoc update pointed out that, “If crop and forage production returns to near normal, the cattle industry is poised for multiple years of favorable returns and expansion. However, everyone watching the ‘Drought Monitor’ knows that much of the country has not yet returned to normal weather conditions. Beef cattle producers will be poised to expand when weather conditions improve. Unfortunately for the beef industry, both poultry and pork producers are waiting at the start line as well. Those industries can expand production much more quickly and will extract market share from beef during the period from late 2013 to 2016.”
Owen Fletcher reported yesterday at The Wall Street Journal Online that, “U.S. soybean futures rose to a seven-week closing high as dry weather threatened to damage crops in Argentina, the world’s third-largest soybean producer…[S]corching heat and cloudless skies over the past few weeks have raised concerns that Argentina may not produce the expected bumper crops that would help rebuild tight global supplies of soybeans. The threat looms after droughts last year in both South America and the U.S. stunted production of the oilseed.”
Meanwhile, Bloomberg writer Isis Almeida reported yesterday that, “Food prices that doubled in the past 10 years are more the result of population growth and increased demand for protein-based diets than any cyclical reasons, according to Sunny Verghese, chief executive officer at Olam International Ltd. (OLAM), the Singapore-based commodities trader.”
The Bloomberg article noted that, “The United Nations’ Food & Agriculture Organization has said global food output must rise 70 percent by 2050 to feed a world population expected to grow to 9 billion from 7 billion now and as increasingly wealthy consumers in developing economies eat more meat. Agriculture has ‘good demand growth,’ Chris Mahoney, director of agricultural products at Baar, Switzerland- based trader Glencore International Plc, said at the conference yesterday [Kingsman sugar conference in Dubai].
“‘In just seven years, the world will need not only to produce, but to move 20 percent more food and also store it, transport it and process it,’ Mahoney said. ‘Without the transport, logistics infrastructure and processing capacity, production even if it keeps pace with demand will be unable to reach the consumer.’”
With respect to infrastructure issues, a recent article at The Economist Online stated that, “Like much of America’s infrastructure, its ports, locks, dams and inland waterways are old, underinvested in, and too often ignored—to the cost of the businesses that depend on them, and the consumers both in America and abroad who buy things that pass through them. Some 70% of America’s imports and 75% of its exports go through its ports.”
The Economist item explained that, “Of the 257 locks in operation in 2009, more than one-tenth were built in the 19th century; the average age of federal locks is 60 years, and they were built with an expected lifespan of 50 years. By 2020 more than 80% of American locks will be functionally obsolete. The extended failure of a single crucial lock could cost agriculture exporters up to $45m and barge operators as much as $163m.”
The U.S. Department of Agriculture’s Economic Research Service (ERS) released a report yesterday titled, “Rising Grain Exports by the Former Soviet Union Region;” an ERS summary of the report indicated that, “During the 2000s, the three major grain-producing countries of the former Soviet Union–Kazakhstan, Russia, and Ukraine (KRU)–became a large grain-exporting region. This report examines why this has happened and also provides the outlook for the region’s production and exports over the next 10 years.”
In more specific trade developments, outgoing U.S. Trade Representative Ron Kirk was a guest on yesterday’s AgriTalk radio program with Mike Adams. In part, Mr. Adams asked Amb. Kirk about U.S. beef and pork exports to Russia. Recall that Russia has expressed concerns about beef products that contain the feed additive ractopamine. A recent Reuters article pointed out that this trade conflict “could jeopardize more than $500 million a year of exports to Russia and coincides with mounting U.S.-Russian tensions over trade and human rights.”
To listen to the discussion on this issue from yesterday’s AgriTalk program, just click here (MP3- 2:31).
In addition, a recent WTO decision regarding Country of Origin Labeling (COOL) issues also came up on yesterday’s AgriTalk program. Sen.
John Jon Tester (D., Mont.) and a group of bipartisan lawmakers have recently expressed an eagerness “to make sure the updated rules still ensure consumers know the origin of their food, giving them the option to buy American meat if they choose.”
To listen to Amb. Kirk’s remarks on yesterday’s AgriTalk program relating to the WTO-COOL issue, just click here (MP3- 1:34).
Zack Colman reported yesterday at The Hill’s Energy Blog that, “The Senate Energy Committee’s top Republican said Monday that she is ‘in good company’ with congressional calls to reevaluate a biofuel-blending mandate.
“Sen. Lisa Murkowski (R-Alaska), the ranking member on the Senate Energy and Natural Resources Committee, joined a growing group of lawmakers Monday in saying Congress should change the renewable fuel standard (RFS).
“‘Let’s have the ability to pull back and say, ‘Maybe this one just didn’t work the way that we had hoped it would,’’ Murkowski said during a Capitol Hill news conference [video replay here] detailing an energy road map she released Monday. ‘Let’s not be afraid to admit that we might need to reform it.’”
The Hill update noted that, “Much of the congressional conversation has occurred in the House, with the Energy and Commerce committee pledging to hold hearings on the fuel rule.”
Tom Steever reported yesterday at Brownfield that, “A coalition of groups wants the renewable fuel standard repealed. A conference call Monday featured spokespeople decrying renewable fuels for food shortages to ruined engines to a damaged environment. Charlie Drevna with the American Fuel and Petrochemical Manufacturers says anything over a ten percent ethanol blend is not appropriate.”
Mr. Steever added that, “However Brian Jennings with the American Coalition for Ethanol takes issue, saying that Drevna cited a type of ethanol fuel that contains water and acid and that is not available on the market.
“‘It had a greater percentage of water than what you find in any fuel today, it had a greater percentage of certain acids than you find in fuel that’s available on the market,’ Jennings told Brownfield Ag News Monday. ‘When you put fuel designed to ruin an engine in an engine in a test, guess what, it’ll be ruined.’”
Farm Bill- Policy Issues
Bob Meyer reported yesterday at Brownfield that, “Another thing that has been very frustrating for many in agriculture is the lack of a farm bill. [Tom Sleight, president and CEO of the U.S. Grains Council] says part of the problem is, members of Congress are not hearing from farmers. He says the Congressional staffers believe that ‘crop insurance took care of the drought and everyone is happy out in the country.’ He says farmers need to drop their Congressional representatives a couple of lines every week to let them know what is really happening out here. ‘Let them know, this is important!’”
Also yesterday, Senate Agriculture Committee member Heidi Heitkamp (D., N.D.) tweeted that, “Held a great meeting with my Ag Advisory Committee today in Bismarck. Going to use the input to continue to push for #farmbill on @SenateAg”
And agricultural economists Carl Zulauf (Ohio State University), Gary Schnitkey (University of Illinois at Urbana-Champaign) and Art Barnaby (Kansas State University) authored a brief paper made available yesterday titled, “List of Alternative Ways to Reduce Farm Premium Subsidies in Crop Insurance.”
An Email summary of the paper indicated that, “[Zulauf, Schnitkey, and Barnaby] provide a paper which lists and briefly discusses alternative options for reducing the cost of farm premium subsidies, the largest cost item in crop insurance. The list is not meant as recommendations; rather it is commonly-discussed alternatives for reducing costs, roughly in order of potential cost savings. It is not a comprehensive discussion. It does not consider if cuts will occur this year or in the future and whether cuts will be made elsewhere in the farm safety net. It is a list.
“Each alternative may impact the actuarial soundness of crop insurance, the possibility that ad hoc disaster assistance is provided, and different crops and areas of the country differentially. It is important to assess these impacts so that a better informed decision is made. A few selected examples are provided as illustrations of the type of analyses that would be desirable.”
And DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “Gail Fuller may find himself being punished for farm and soil stewardship practices that have won him praise.
“That would be a disappointment to those who fervently believe proper care for the soil — above all things — should be rewarded.
“The extended drought, crop-insurance rules, stewardship practices to build organic matter in soil and conflicting USDA agencies’ dictums are all crossing paths in a bad way for Fuller, a 50-year-old grain and livestock farmer from Emporia, Kan.”
Mr. Clayton noted that, “While there are guys out there sitting on a lot of land equity, Fuller isn’t necessarily one of them. He faces the possible loss of his farm because of cancellation of his crop-insurance policy on the 2012 crop. Fuller is an enthusiastic advocate for protecting the land from erosion and building organic matter back into the soil. But his planting practices in 2012 got crossways with a USDA Risk Management Agency crop insurance rule requiring cover crops to be terminated before cash crops are planted.
“Fuller lost his policy on some of his fields because he planted soybeans and other cash crops on his 1,800-acre farm before terminating his mix of cover crops. RMA has required such cover-crop terminations. Fuller left cover crops growing, ranging from days to weeks, after he had planted the spring crops, before he could spray to kill the cover off.”
The article went on to explain that, “In late July of last year, Fuller was informed by his insurer that he had to undergo a growing-season inspection. He was later informed that his policy had been canceled. He hadn’t terminated his cover crop before planting his cash crop. Fuller has now applied with the insurance company for remediation, but he’s also challenging USDA’s Risk Management Agency over the validity of the rule.
“‘We decided to appeal it on the approach that the rule was wrong,’ Fuller said.
“Fuller said the policy cancellation has become an opportunity for soil-health researchers and advocates for no-till farming and cover crops to educate RMA about the value of the practices.”
Mr. Clayton pointed out that, “RMA is trying to quantify the actuarial soundness of a producer’s farming operation, and that is made more complicated by sustained drought. But over the past year, RMA sought to improve its stance for farmers who use covers. The agency also worked to encourage farmers to plant cover crops last fall on acres considered damaged or destroyed, citing that it would not affect 2013 spring crops.
“Local and state officials in various capacities are now advocating for farmers to grow more covers largely because of the effects cover crops have in reducing dust storms and improving water quality in rivers and streams. An increasing number of states pay farmers or provide cost-share for cover crops in parts of the Chesapeake Bay or Mississippi River basins.
“Thus, producers who grow cover crops are questioning how a farmer can lose his insurance policy for protecting the soil from erosion while bare fields are not penalized.”
Budget- CBO “Baseline”
Lori Montgomery reported in today’s Washington Post that, “For the third year in a row, President Obama on Monday blew the deadline for submitting his budget request to Congress, prompting Republicans to grouse once again about presidential fecklessness on fiscal matters.
“Less usual was the administration’s refusal to say when Obama would release his 2014 spending plan. Congressional aides in both parties said they expect to see the budget in mid- to late-March — a delay of more than a month, unmatched by any other incumbent president except, on one occasion, Ronald Reagan.
“Though Obama’s budget requests have been dead on arrival in Congress since Republicans took control of the House two years ago, the blueprint remains an important political document. That’s particularly true this year as lawmakers gird for showdowns over automatic spending cuts, a government shutdown and the federal debt limit.”
And Vicki Needham, Erik Wasson and Bernie Becker reported yesterday at The Hill’s On the Money Blog that, “The Congressional Budget Office (CBO) on Tuesday will release its annual budget and economic update that will take a peek into the nation’s financial condition.”
The update noted that, “The CBO report will form the ‘budget baseline’ by which House Budget Committee Chairman Paul Ryan (R-Wis.) and Senate Budget Committee Chairwoman Patty Murray (D-Wash.) will rewrite their radically different fiscal 2014 budget plans.”
Russell Berman reported yesterday at The Hill Online that, “A bipartisan group of House negotiators is even further along in drafting a comprehensive immigration overhaul than its counterpart in the Senate, but the path to passage in the lower chamber is lined with thorns.
“Republican House leaders from Speaker John Boehner (Ohio) on down have not decided how to handle the vexing issue, even as they have voiced general support for ‘addressing’ it in 2013.”
The Hill article pointed out that, “The new chairman of the House Judiciary Committee, Rep. Bob Goodlatte (R-Va.), signaled in an interview that the panel would move at a deliberate pace on immigration, in part because Republican leaders need to educate more than 100 first- and second-term members who Goodlatte said ‘know very little’ about the complexities of immigration law.
“Goodlatte is holding the panel’s first full hearing on immigration on Tuesday — the first of what he told The Hill would be a ‘long series of hearings’ on the issue.” [See this related article in today’s New York Times, “Immigration Hearings Set to Open in the House.”]
David Nakamura reported yesterday at The Washington Post Online that, “President Obama will meet separately Tuesday with labor and business leaders on immigration reform, as the White House seeks to enlist the often at-odds interest groups in a common push toward a comprehensive legislative package.”