Agricultural Economy- Trade
Joshua Chaffin and James Politi reported last week at The Financial Times Online that, “The faultlines over a proposed EU-US trade agreement came into sharp focus on Thursday as the European Parliament backed French demands to exclude cultural fare from a pact as US farmers blasted Europe’s safety standards as protectionist.
“The contrasting positions were a reminder of the entrenched disagreements that negotiators will have to overcome if they are to deliver an agreement that has received political backing at the highest levels on both sides of the Atlantic.
“The two sides are hoping to begin negotiations in July for an agreement that is being counted on to boost economic growth on both sides of the Atlantic and be a benchmark for the technical and legal standards for future trade agreements.”
The FT article added that, “Even before the vote, US farm lobby groups already had their concerns. They are particularly displeased with part of the EU resolution adopted on Thursday intended to protect the precautionary principle underlying EU bans of things such as US-produced genetically modified crops and beef implanted with hormones.”
Chaffin and Politi explained that, “In a move that could complicate negotiations, the farm groups asked [Mike Froman, the top White House official on international economic policy and the nominee for US trade representative] to set up a negotiating framework similar to the one the US has employed with Japan in the Trans-Pacific Partnership. In those talks, agricultural food safety issues are placed in a separate bucket of bilateral talks which have to be completed successfully as a condition of any TPP deal.
“This is because US farm groups are worried that the US will ultimately agree to abandon its tricky demands for greater agricultural market access in Europe in order to save the entire agreement.
“Spokespeople for USTR and Mr Froman did not immediately reply to requests for comment on Thursday. Next week, USTR will hold two days of public meetings to get input on the US negotiating objectives in the EU trade deal.”
Also, the May edition of Monitoring Agri-trade Policy (MAP), an update published by the European Commission, stated that, “The times where the EU continuously recorded a negative trade balance seem to be over. In 2012, the EU hit a new record in agricultural trade surplus: €12.6 billion. While its imports hardly budged, the exports put the EU just inches behind the US in the ranking of world top agricultural exporters. The increase in exports and a resulting all-time high surplus indicate that the growth in demand for EU products is essentially driven by export markets (especially developing economies) rather than by the economically depressed EU domestic market. In addition, depreciation of the Euro against major currencies has also helped the EU to boost its sales.” See this interesting graph from the report, which depicts the top five world agricultural exporters.
The MAP report noted that, “The EU also hit a new record in sales to its top partner, the US, which accounted for some 13% of EU total agricultural exports. Although in 2012 the largest absolute gain in exports was achieved in the US, the fastest growing markets were China and Saudi Arabia.
“This MAP not only looks at EU agricultural trade, but also briefly discusses developments in trade of key agricultural players such as the US, Brazil, China and Russia. In particular, it reveals that the US had record sales to China, as its soya beans exports soared. On the other hand, Brazil took over the US market shares in Asian and Middle East markets after drought hit the US corn harvest.”
On page ten, the MAP report indicated that, “The US continues to remain the EU’s biggest market for agricultural exports, while the EU is the fifth biggest market for the US. After a recovery in 2010 and a moderate increase in 2011, EU sales on the US market kept on growing (+13% over 2011) to reach an all-time high of over €15 billion (13% of EU agricultural exports). These record sales can be mainly attributed to the increase in the value of final goods (up by 14%).
“The EU surplus with the US in 2012 reached a record €6.8 billion (in 2011: €5.2 billion) (see graph 15).”
Meanwhile, Reuters writer Doug Palmer reported last week that, “Major trade legislation appears increasingly likely to clear Congress this year despite an intensely partisan atmosphere made worse by scandals plaguing President Barack Obama’s administration.
“Business groups are preparing to push for the bill, which would give the White House enhanced ability to negotiate trade deals and set out U.S. negotiating goals on issues ranging from cross-border electronic data flows to global supply chains and potentially even foreign currency practices.”
Mr. Palmer pointed out that, “Bipartisan legislation could emerge soon from talks between the top Democrats and Republicans on the Senate Finance Committee and the House of Representatives Ways and Means Committee, which have jurisdiction over trade laws.
“The action is driven by White House efforts to strike major trade deals with 11 other countries in the Asia-Pacific region and the 27 nations of the European Union.
“The legislation would allow Obama to submit trade agreements to Congress for straight up-or-down votes without amendments, giving other countries the assurance that any deal they reach with the United States will not be changed by the House or Senate.”
In other news developments, in a closer look at societal changes in India, an article in Monday’s New York Times by Gardiner Harris (“For New Breed of Rustlers, Nothing Is Sacred”) noted that meat eating is on the rise in India, and cows — considered sacred in Hinduism — are being stolen off the street by cattle rustlers and sold to illegal slaughterhouses.
“Cattle rustling, called ‘lifting’ here, is a growing scourge in New Delhi, as increasingly affluent Indians develop a taste for meat, even the flesh of cows, which are considered sacred in Hinduism. Criminals round up some of the roughly 40,000 cattle that wander the streets of this megacity and sell them to illegal slaughterhouses located in villages not far away,” the article said.
Harris pointed out that: “Behind the cattle rustling is a profound shift in Indian society. Meat consumption — chicken, primarily — is becoming acceptable even among Hindus. India is now the world’s largest dairy producer, its largest cattle producer and its largest beef exporter, having surpassed Brazil last year, according to the United States Department of Agriculture.”
A recent update from Ohio State University Extension pointed out that, “Ohio cropland values and cash rental rates are projected to increase in 2013. According to the Ohio Cropland Values and Cash Rents Survey bare cropland values in western Ohio are expected to increase from 6.8% to 15.4% in 2013 depending on the region and land class. Cash rents are expected to increase from 7.8% to 10.7% depending on the region and land class.”
Tony Perry reported yesterday at the Los Angeles Times Online that, “As a regional drought tightens its grip on the Colorado River, water agency officials, environmentalists, farmers and Indian tribal leaders from the seven states that depend on the river for survival are expected to gather Tuesday for a ‘moving forward’ meeting called by federal officials.
“Last year was dry, this year is even worse, officials said.
“If the trend continues, Lake Powell and Lake Mead, the Colorado River’s two giant reservoirs, will be at 45% capacity by year’s end, their lowest since 1968.”
Mr. Perry noted that, “In December, the federal government released the results of a three-year study warning that drought, climate change and population growth are fast outstripping the water supply from the Colorado River.
“The river provides for the daily needs of 40 million people, including those in Los Angeles, San Diego, Denver, Las Vegas and Phoenix. Farmers and ranchers in western states also use the river to irrigate 4 million acres of cropland where 15% of the nation’s food supply is grown.”
Perry Beeman reported last week at The Des Moines Register Online that, “Western Iowa’s drought conditions continued slow improvement through Tuesday, leaving 64.5 percent of the state drought-free, the U.S. Drought Monitor reported Thursday.
“That was a three percentage point improvement from the week before.
“That leaves 35.5 percent of the state, all in western counties, either abnormally dry or in some stage of drought. That was a drop of three percentage points from the week before.”
However, Josh Hafner reported yesterday at The Register Online that, “While Marshalltown and other parts of Iowa may not see additional heavy rains tonight, Jeff Johnson of the National Weather Service in Johnston said they’ll arrive eventually. The state remains prone to heavy rainfall through Friday with roughly 5 inches expected statewide.”
Pat Curtis reported yesterday at RadioIowa Online that, “Many Memorial Day ceremonies in Iowa are being moved indoors or canceled due to the wet weather. Heavy rains this weekend have led to flash flooding in sections of central and eastern Iowa…[I]n fact, scattered showers are forecast every day this week.”
And Chicago based meteorologist Tom Skilling tweeted yesterday that, “Thundery downpours a big concern in days ahd. Models kick out 2.72″ nxt 5 days–4.5 times normal! Flood watches out Iowa into central IL.”
Maps from the Weather Prediction Center (National Weather Service) indicated that abundant rainfall may occur over portions of Iowa, Missouri and Illinois.
Stephanie Strom reported in yesterday’s New York Times that, “Food companies big and small are struggling to replace genetically modified ingredients with conventional ones.
“Pressure is growing to label products made from genetically modified organisms, or ‘G.M.O.’ In Connecticut, Vermont and Maine, at least one chamber of the state legislature has approved bills that would require the labeling of foods that contain genetically modified ingredients, and similar legislation is pending in more than two dozen other states. This weekend, rallies were held around the globe against producers of genetically altered ingredients, and consumers are threatening to boycott products that are not labeled.
“And so, for many businesses, the pressing concern is just what it will take to gain certification as non-G.M.O.”
(Recall that last week the U.S. Senate voted down an amendment to the 2013 Farm Bill “to let states require labels on food or beverages made with genetically modified ingredients” by a vote of 71 to 27.)
The Times article stated that, “The shift is evident in prices of nongenetically modified crops, which have been rising as more companies seek them out. Two years ago, a bushel of non-G.M.O. soybeans cost $1 to $1.25 more than a bushel of genetically modified soybeans. Now, that premium is $2. For corn, the premium has jumped from 10 cents to as high as 75 cents.
“‘We’ve had more calls from food processors wanting to know if we can arrange for non-G.M.O. supplies,’ said Lynn Clarkson, founder and president of Clarkson Grain, which sells such conventional grains.”
And Ms. Strom explained that, “In this country, roughly 90 percent or more of four major crops — corn, soybeans, canola and sugar beets — are grown from genetically engineered seeds, creating a challenge for companies seeking to swap to ingredients sourced from conventional varieties. A portion of the conventional varieties of those crops is exported, and much of the rest of those crops is already spoken for by organic and other companies here.
“Additionally, the livestock industry is increasing its demand for non-G.M.O. crops to meet growing demand among consumers for eggs and meats sourced from animals that have never eaten genetically modified feeds.”
The Washington Post editorial board indicated today that, “It’s in no one’s interest to saddle farmers and ranchers with an unstable workforce and labor shortages that threaten the supply of domestically grown crops. The agricultural provisions in the immigration bill would go a good distance toward fixing that. And as part of the overall immigration legislation, it may generate support for the bill from some rural lawmakers who would otherwise oppose it.”
And David Nakamura reported in today’s Washington Post that, “For hard-line foes of immigration reform, the lopsided outcome [of the 13 to 5 Senate Judiciary Committee vote approving a comprehensive immigration bill] produced a moment of clarity about the challenges they face in repeating their 2007 feat of scuttling comprehensive immigration legislation. Unlike six years ago, the loudest voices of dissent were drowned out by a disciplined performance from a bipartisan group of eight senators who teamed up to fight off the most serious threats to the bill.
“‘They announced flat out at the beginning of the process that they would rally around and defeat any amendment that would alter their agreement,’ [Sen. Jeff Sessions (R., Ala.)] lamented of the group of four Democrats and four Republicans, known as the Gang of Eight. ‘The core has held, and the bill is coming forward to the floor of the Senate with not a lot of changes.’
“The committee vote was only the first skirmish in a long battle ahead for a bill that represents the most sweeping overhaul of immigration law in nearly three decades, its prospects buoyed in part by Republican worries over a lack of Latino support. The legislation moves to the full Senate floor next month, where passage is likely but not guaranteed. The Republican-controlled House is negotiating its own plan, which is expected to be more conservative.”
The Post article noted that, “Senate supporters of immigration reform think they emerged from the judiciary panel’s hearings in a strong position, adopting key amendments to help mitigate criticisms. In 2007, when a bipartisan group offered a bill, Senate leaders avoided the committee process and took the legislation directly to the floor, where opponents quickly fractured the coalition with ‘poison pill’ amendments.”